I’ve been blogging for nearly 15 years and one reason I keep things going here (admittedly more infrequently than I’d like) is that I thoroughly enjoy looking back at old articles, especially when it comes to financial goals. In fact, one of my favourite posts of all time is a 2019 net worth update when I optimistically quipped, “2020 is going to be a great year!”.

Too funny.

Setting financial goals can be tricky because you need to make some assumptions about the future – that you’ll earn what you think you’re going to earn, spend what you think you’re going to spend, and save what you think you’re going to save without too many surprises along the way.

But a year is a long time and life can be surprising. Heck, just look at the last five years and what has changed around the world and in your own lives.

At the end of 2019, I had just quit my day job and decided to go all-in on my financial planning business and freelance writing. Then a global pandemic hit, markets crashed, and I was questioning everything.

But it turned out the shift to Zoom and more work-from-home freedom was a tremendous boon for our business. With travel plans on hold for two years, we saved a bunch of money and reconsidered our living situation. We built a new house that fit our new lifestyle (office, home gym, closer to the kids’ new schools).

Annual goal setting is just a microcosm of financial planning. You have a general idea of what you want out of life, and chart a course to get there. Short-term planning is a little more certain than planning many decades in advance. But it still requires regular monitoring, not only to see if you’re on the right track but if those goals are still your top priorities. Again, life can be surprising.

Last year I listed our financial goals for 2024:

1. Give ourselves another pay raise for 2024. We plan on increasing our wages by 10%.
2. Reorganize kids’ RESPs to follow the Justin Bender RESP strategy. That means selling e-Series funds and setting up a risk appropriate ETF portfolio for each child. We’re also switching to annual contributions (January) and making one catch-up contribution for our oldest child. Total contributions of $7,500 in 2024.
3. Revenge travel part two. We plan on taking a hot holiday in February, an epic trip through Europe in July (including a Taylor Swift concert in Zurich!), and a return to Scotland later in the year.
4. Invest excess profits in the corporate investing account (targeting $90,000).
5. Renew mortgage, taking the best of either a short-term fixed rate (1-2 years) or 5-year variable rate when it comes up for renewal in May.

Checking in a year later, how did we do?

Well, we recognized a glaring hole in our plan. Our TFSAs. So, we actually increased our income significantly more than expected this year (40%) to help facilitate our TFSA snowball (refilling our TFSAs as quickly as possible). My wife and I will have each contributed $28,000 to our empty TFSAs this year.

We did reorganize our kids’ family RESP account, selling off the long-held TD e-Series funds and buying VEQT and VSB for our oldest daughter and XEQT and XSB for our youngest daughter. We did the catch-up contribution of $2,500 for our oldest daughter and contributed a total of $7,500 in January. I’m really pleased with this transition, as it’s dead-simple to manage and separate each child’s share of the account.

We thoroughly enjoyed our trips this year, soaking up the sun in Cancun, traversing across four countries this summer, and enjoying a relaxing stay in Edinburgh this fall.

Our business hit record revenue this year, which allowed us to meet our higher personal income needs and come reasonably close to reaching our corporate investing target. We’ll contribute $70,000 to our corporate investments. Again, we changed this up on the fly to prioritize a faster TFSA catch-up. Paying a bit more personal tax now is worth getting money into our TFSAs to grow tax-free for longer.

Finally, we did renew our mortgage in April but ended up going with a 3-year fixed rate term at 4.94%. That term was projecting to save the most money at the time, since we had yet to see an interest rate cut from either the Bank of Canada or the U.S. Federal Reserve. Had our renewal come up later in the summer we might have opted for a variable rate. Oh well.

What’s in-store for 2025? Here are our top financial goals for the year ahead:

1. Contribute $28,000 each to our TFSAs as part of our TFSA snowball (aggressive catch-up) strategy.
2. Contribute $5,000 to our kids’ RESP in January and rebalance the portfolio for their age 16 and 13 years.
3. Take three trips (Cancun in February, Italy in April, and England/Scotland/possibly Finland in the summer).
4. Earn enough business revenue to meet our personal income needs (same as 2024) and contribute $80,000 to our corporate investments.
5. Pay for bi-weekly cleaning, summer lawn care, and winter snow removal to allow more time for work, leisure, and family.
6. Reach the $2M net worth milestone (a stretch goal that is only possible with another strong year of market returns).

We’re painfully aware that our kids are fast approaching their post-secondary years and life could look dramatically different in the near future. We’re thinking carefully about the trips we want to take with them while they’re still under our roof, and about where they might want to attend school when the time comes.

We’re building up our financial resiliency by maxing out our TFSAs again, maxing out the kids’ RESPs, and likely holding more cash than usual in our business just in case. In case of what? In case post-secondary is more expensive than anticipated. In case we have a chance to take a bucket list trip together. In case we want to move again (not anytime soon, I hope!) and follow our kids wherever life takes them.

Financial planning is about setting up future-you with options. Goals and priorities might change. We always want to be in a strong financial position so we can adapt, if needed.

How did you do with your financial goals in 2024? Have you thought about your 2025 goals yet? Let me know in the comments.

I’ve fielded a dozen emails from clients and readers about the U.S. election and how it might impact their portfolios.

The short answer: Who knows?

A longer answer: The stock market probably doesn’t care as much about the election as you think it does.

Besides, there has been an election every four years for the last 250 years. What do people think is going to happen?

There will always be something going on in the world that causes anxiety for investors. What we need is to come up with an investing strategy that we can stick with through good and bad times, knowing that it will meet our long-term objectives.

Once you’ve decided on that investing approach, the first rule to know is:

“Your investing approach shouldn’t change based on current market conditions.”

It’s one thing to be nervous about high market valuations, inflation, or changing governments. We can use evidence-based thinking to calm our fears knowing that staying invested in a globally diversified and automatically rebalancing portfolio leads to the best outcomes.

We also know that markets frequently reach all-time highs. And, while US markets in particular are high, emerging markets and international stocks are still relatively cheap by comparison.

We also know that the best inflation hedge is a globally diversified portfolio of stocks.

Finally, when it comes to government changes we often look to the US where investors get nervous around presidential elections. Investors wanted to dump stocks when Trump got elected the first time in 2016. Then they wanted to dump stocks when Biden got elected in 2020. On both occasions it would have been disastrous to bail on stocks and move to cash.

In summary, the stock market probably doesn’t care who is President of the United States.

If your portfolio is sitting in cash today, I cannot stress enough to get your money invested right away and not worry about macro events that may or may not have an impact on the market. 

Otherwise you’ll always have a reason to panic and try to time the market (a slowdown in China, a European debt crisis, a regional conflict, the Dallas Cowboys winning the Super Bowl, etc.).

Stay invested in a low cost, risk appropriate fund and go enjoy your life!

This Week’s Recap:

10 years ago I sold all of my dividend stocks and switched to low cost index funds. Thanks to Bob Lai for giving me the chance to explain myself to dividend investors on his Tawcan personal finance blog.

We had a lovely 10-day holiday in Edinburgh, staying in the iconic Dean Village and exploring more of our favourite city.

This time we checked out the Edinburgh Zoo, hopped on a bus to Roslin to visit the famous Rosslyn Chapel, took a day trip to Glasgow to check out the University (our oldest daughter’s dream), met up with my friend and long-time freelance editor for drinks, and had some amazing vegan food in Edinburgh.

That’s it for trips this year, but we already have some travel plans for 2025 – including a week in Cancun in February and 10 days in Tuscany during Easter break. Summer is up in the air, but will likely include the Scottish Highlands and/or exploring more of England, specifically the Cotswolds.

My last weekend reading update looked at the TFSA snowball – an aggressive savings strategy to catch-up on unused TFSA contribution room.

Speaking of contribution room, it’s now official that the annual TFSA contribution limit will remain at $7,000 in 2025. That brings the total lifetime limit up to $102,000.

Promo of the Week:

Wealthsimple is fresh off of a wildly successful campaign in which they paid a 1% transfer bonus to customers who deposited or transferred money to their accounts.

Now they’re back with a new promotion, where you can get an iPhone or Mac when you register and move $100,000 or more to Wealthsimple.

• Register by December 13th
• Transfer or deposit $100,000 or more within 30 days of registering
• Once you qualify you can choose an iPhone or a Mac starting January 15th
• Deposit $100,000 – $299,999 and you’ll get an iPhone 16 or a MacBook Air.
• Deposit $300,000 – $499,999 and you’ll get an iPhone 16 Pro or a MacBook Pro.
• Deposit $500,000+ and you’ll get an iPhone Pro Max or a MacBook Pro with M4 Pro chip.

Get another $25 when you fund any Wealthsimple account with my referral code: FWWPDW

Good news for those of you with simple corporations – Wealthsimple has started to roll out early access for self-directed corporate accounts. For now, the entity must be a corp and must have only one beneficial owner and director (bummer for us, we’re joint owners).

I’m registering for the iPhone promo anyway in hopes they expand access to the self-directed corporate accounts. We’ve got $425,000 parked at Questrade that we’d love to move over to Wealthsimple.

Weekend Reading:

From MoneySense: After rushing into the real estate market, I quickly learned I wasn’t ready for the real cost of home ownership.

Forever an optimist (like me!) A Wealth of Common Sense blogger Ben Carlson asks: Am I a permabull?

Financial planner Markus Muhs shares why dollar cost averaging is good for the soul.

In retirement, some income is not subject to withholding tax, and you may potentially owe tax after filing each year. Advice-only planner Jason Heath explains how to plan for taxes in retirement.

Are you afraid to begin investing? Millionaire Teacher Andrew Hallam explains why you should invest your money as soon as you have it. Hmm, sounds familiar.

Does your relationship with your financial adviser feel off? Financial planner Anita Bruinsma shares three red flags to watch for.

PWL Capital’s Ben Felix explains why you will probably lose money trading options:

Some advisors and investors like to play semantic games, saying passive investing doesn’t exist because even an index like the S&P 500 is “actively” reconstituted, while even the most passive investor still needs to “actively” contribute or rebalance. The point is that decisions need to be made.

Michael James on Money says that’s nonsense – passive investing does exist. I agree.

Finally, from HENRY to NENRY – Of Dollars and Data blogger Nick Maggiulli shares a cautionary tale about the low stability of high income.

Have a great weekend, everyone!

The federal government kept the annual TFSA contribution limit at $7,000 for 2025 – the same limit we had in 2024. It’s still good news for Canadian savers and investors, who as of January 1, 2025, will have a cumulative lifetime TFSA contribution limit of $102,000.

The Tax Free Savings Account (TFSA) was introduced in 2009 by the federal conservative government. The TFSA limit started at $5,000 that year – an amount that “will be indexed to inflation and rounded to the nearest $500.”

With inflation starting to cool off at an average rate of 2.7% in 2024 (versus 4.7% in 2023 and 6.3% in 2022) it will be a coin flip as to whether the annual TFSA limit will increase in 2026.

TFSA Contribution Limit Since 2009

The table below shows the year-by-year historical TFSA contribution limits since 2009.

Note that the maximum lifetime TFSA limit of $102,000 applies only to those who were 18 or older as of December 31, 2009. If you were born after 1991 then your lifetime TFSA contribution limit begins the year you turned 18.

You can find your TFSA contribution room information online at CRA My Account, or by calling Tax Information Phone Service (TIPS) at 1-800-267-6999.

TFSA Overview

The Tax Free Savings Account is a flexible vehicle for Canadians to save for a variety of goals. You can contribute every year as long as you’re 18 or older and have a valid social insurance number.

That means young savers can use their TFSA contribution room to establish an emergency fund or save for a down payment on a home. Long-term investors can use their TFSA to invest in ETFs, stocks, or mutual funds and save for the future. Retirees can continue to save inside their TFSA for future consumption or withdraw from their TFSA tax-free without impacting their Old Age Security or GIS.

Unlike an RRSP, any amount contributed to your TFSA is not tax deductible and so it does not reduce your net income for tax purposes.

• Your contribution room is capped at your TFSA limit. Excess contributions will be taxed at 1 percent per month
• Any withdrawals will be added back to your TFSA contribution room at the start of the next calendar year
• You can replace the amount of your withdrawal in the same year only if you have available TFSA contribution room
• Any income earned in the account, such as interest, dividends, or capital gains is tax-free upon withdrawal

How to Open a TFSA

Any Canadian 18 or older can open a TFSA. You are allowed to have more than one TFSA account open at any given time, but the total amount you contribute to all of your TFSA accounts cannot exceed your available TFSA contribution room.

To open a TFSA you can contact any bank, credit union, insurance company, trust company or robo-advisor and provide that issuer with your social insurance number and date of birth.

The most common type of TFSA offered is a deposit account such as a high interest savings account or a GIC.

You can also open a self-directed TFSA account where you can build and manage your own savings and investments.

Qualified TFSA Investments

That’s right – you’re not just limited to savings accounts and GICs. Generally, you can put the same investments in your TFSA as you can inside your RRSP. These types of allowable investments include:

• Cash
• GICs
• Mutual funds
• Stocks
• Exchange-Traded Funds (ETFs)
• Bonds

You can contribute foreign currency such as USD to your TFSA. Note that your issuer will convert the funds to Canadian dollars. The total amount of your contribution, in Canadian dollars, cannot exceed your TFSA contribution room.

If you receive dividend income from a foreign country inside your TFSA, the dividend income could be subject to foreign withholding tax.

Gains Inside Your TFSA

Some investors may be tempted to put risky assets inside their TFSA account to try and earn tax-free capital gains. There are two advantages to this strategy:

1. Earn tax-free capital gains
2. Potentially increase your available TFSA contribution room

For example, I maxed out my annual TFSA contributions in 2009, 2010, and 2011. That meant contributions of $15,000. I invested these funds in dividend paying stocks, which, over time, increased the total portfolio value to $19,500.

I withdrew the entire amount in mid-2011 to top-up the down payment on our new house. When the calendar turned to 2012, I had a new lifetime TFSA contribution limit of $24,500.

How did I have $24,500 in unused TFSA contribution room available even though most other Canadians had $20,000?

Any TFSA withdrawals are added back to your available TFSA contribution room at the beginning of the next calendar year. That amount was $19,500. In addition, the 2012 TFSA limit of $5,000 was added to my overall TFSA contribution room for a total of $24,500.

Losses Inside Your TFSA

The risk cuts both ways, though.

Let’s say the dividend stock picks inside my TFSA incurred a loss of $4,500. I contributed $15,000 but they’re only worth $10,500 when I need to withdraw the money for my house down payment.

The next calendar year, after I withdrew the funds, I would have only saw $10,500 added back to my TFSA contribution limit, plus the new 2012-dollar limit of $5,000 – for a total TFSA limit of $15,500.

The other downside to an investment losing money inside your TFSA is that you cannot claim a capital loss.

“In kind” TFSA Contributions

You can make “in kind” contributions to your TFSA – for example transferring stocks or funds held in your non-registered account to your TFSA.

According to the CRA, you will be considered to have disposed of the security at its fair market value at the time of the contribution. If that value is more than the original cost of the security, you will have to report the capital gain on your income tax return. However, if the value is less than the original cost, you cannot claim the resulting capital loss.

The amount of the contribution to your TFSA will be equal to the fair market value of the property.

This can be an excellent strategy for seniors and retirees to transfer securities from their taxable investment account and into their sheltered “tax-free” TFSA.

Transfer from your RRSP

You can also transfer an investment from your RRSP to your TFSA. Again, according to the CRA, you will be considered to have withdrawn the investment from the RRSP at its fair market value.

This amount is reported as an RRSP withdrawal and must be included in your income for that tax year.

“The tax withheld on the withdrawal can be claimed at line 437 of your income tax and benefit return.”

If the transfer from your RRSP to TFSA takes place immediately, the same value will be used as the amount of the contribution to the TFSA. If the contribution is delayed or deferred, the amount of the contribution will be the fair market value of the investment at the time of that contribution.

TFSA Over-Contribution Penalty

Unlike the RRSP Over-Contribution limit of $2,000, TFSAs have no such room for error.

Some Canadians have run afoul of the CRA for over-contributing to their TFSA. The excess contributions are subject to a 1% penalty tax per month. For example, if you’ve over-contributed $1,000 you would have to pay $10 per month.

If you receive a TFSA excess amount letter from the CRA you should remove the excess amount immediately. Go to your My CRA Account for your room limit as of January 1, or complete Form RC343, Worksheet – TFSA contribution room if you have contributed to your TFSA in the current year.

TFSA Impact on Government Benefits

The TFSA has been a tremendous boon for seniors and retirees. The main advantage is that any income earned inside your TFSA, or amounts you withdraw from your TFSA, won’t impact means-tested government benefits such as Old Age Security (OAS) and the Guaranteed Income Supplement (GIS).

That means retirees could get a portion of their retirement income from their TFSA and not have that amount increase their total net income. This is beneficial to either preserve GIS benefits or to avoid the dreaded OAS clawback.

TFSA income or withdrawals will also not affect employment insurance benefits, or your eligibility for other credits such as the Canada child benefit (CCB), the working income tax benefit (WITB), the GST credit, or the age amount.

TFSA Beneficiaries and Death of TFSA Holder

There are two types of TFSA beneficiaries:

1. A survivor who has been designated as a successor holder
2. Designated beneficiaries, such as a survivor who has not been named successor holder, a former spouse or common-law partner, children, and qualified donees

A successor holder is a spouse or common-law partner of the holder at the time of death and is named by the deceased as the successor holder of the TFSA.

The successor holder acquires all of the rights of the holder, including the right to revoke any beneficiary designation. This spouse or common-law partner becomes the new TFSA account holder.

The TFSA continues to exist and both its value at the date of the original holder’s death and any income earned after that date continue to be sheltered from tax under the new successor holder.

The successor holder can make tax-free withdrawals from the deceased holder’s TFSA account. He or she can also make new contributions to that account, subject to their own unused TFSA contribution room.

Investing Ideas for your TFSA

The TFSA is an incredible savings tool. Low income earners should primarily use their TFSA to save for retirement, while higher income earners should maximize their RRSP contributions first, but ideally contribute to both their RRSP and TFSA.

Related: A Sensible RRSP vs. TFSA Comparison

Here are my recommendations for the best TFSA investments for long term savers:

Invest with a Robo Advisor: Robo-advisors offer Canadians an easy and hands-off way to automatically invest for the future. Open a TFSA at a robo-advisor like Wealthsimple and you can invest in a diversified portfolio of index ETFs for a management fee of 0.50 percent, plus the MER of the ETFs, for a total cost of about 0.65 percent.

DIY Invest with ETFs: Investors who are more inclined to take the wheel themselves can open a self-directed TFSA account at a discount broker like Questrade and build their own investment portfolio. With the introduction of one-ticket asset allocation ETFs from the likes of Vanguard, iShares, and BMO, it’s never been easier to build a globally diversified portfolio on the cheap. Vanguard’s VBAL, for example, represents the classic 60/40 balanced portfolio and comes with a MER of just 0.24 percent.

Invest in bank index funds: Maybe you’re more comfortable staying at your home bank and investing through an advisor. Know that every bank offers its own suite of index funds, which are considerably cheaper than their actively managed cousins and tend to outperform. Open a TFSA account at your bank and insist on getting a portfolio of index funds. TD’s popular e-Series funds are the most highly rated and lowest cost of the bunch and will cost around 0.45 percent. Expect the other banks’ index funds to cost closer to 1 percent.

As for me, I’ve explained before exactly how I invest my own money, holding Vanguard’s All Equity ETF (VEQT) across all accounts – including inside my TFSA at Wealthsimple Trade. I prefer to use my TFSA for long-term investing rather than as a place to stash cash in a high interest savings account.

Tax free growth for the win!