I wasn't sure what to expect when I quit my job last year to focus on blogging, freelance writing, and my fee-only financial planning business. My top priority was to make sure we were able to maintain our current spending and savings rate. In other words, I didn't want this transition to have any negative financial impact to our lifestyle.
The pandemic threw a wrench into our spending plans as we weren't able to travel. Instead, we made the most of our time stuck at home by upgrading our backyard experience (new patio furniture and a hot tub). No regrets.
Our savings goals got a boost when I decided to take the commuted value of my pension in March. I had originally planned to max out the small amount of RRSP contribution room I had, plus top-up my TFSA and max out the kids' RESP. Instead, I received a taxable payout of $156,000, plus got to put $134,000 into a LIRA. I used the cash to immediately max-out my unused TFSA room.
The cash payout also changed the way we planned to pay ourselves from our small business. We lived on the remainder of the proceeds this year and kept more money inside our business. I also opened a corporate investment account at Questrade to invest the excess cash inside our business.
Speaking of investing, it was a crazy year for the stock market. My stomach was in knots when my 100% global stock portfolio fell by 34% in the fastest decline in history. Who would have known stocks would come roaring back just as quickly? As of this writing, my RRSP is up 8.56% on the year while my TFSA is up 13.72% thanks to a large April infusion.
My big hairy audacious goal was to reach $1M in net worth by the end of this year. That milestone was in doubt earlier this year, but is now in reach thanks to a rising stock market. Stay tuned for my year-end net worth update to see if I made it.
Finally, the biggest unknown was how well our business would perform. I left a job that paid ~$50 an hour to focus on work that was paying closer to $200 an hour. Could that number be scaled with more hours and effort?
That did turn out to be the case. With my wife handling more of the administrative duties I was able to focus on what I do best, which is writing, financial planning, and promoting the business. We doubled our revenue from last year!
2021 Financial Goals
Next year will be more ‘normal' from a financial perspective. You might even say boring, which is fine with me. These are our top financial goals for 2021:
1). Catch up on my wife's TFSA contributions
We've neglected my wife's TFSA to focus on our RRSPs in recent years. Now that our RRSPs are maxed out we'll turn our attention to my wife's TFSA and aim to contribute a whopping $50,000 to it this year.
We're able to make such a big contribution because we don't have any RRSP room left and I have caught up on my unused TFSA room. Filling up my wife's TFSA is the number one savings priority now, and we should be all caught up in two years.
My wife moved her RRSP to Wealthsimple a few years ago and will continue to use the robo advisor platform for her TFSA.
2). Max-out my TFSA
I'm “current” with my TFSA contributions for the first time since 2011. This goal will be achieved when the markets open on January 4, 2021.
My $6,000 contribution will be invested in Vanguard's VEQT (as I described in this post on how I invest my own money).
3). Add to Corporate Investment Account
We've got a pretty good handle on the monthly cash flow inside our business and how much cash we feel comfortable holding as an emergency buffer. Anything over and above that amount will be invested in our corporate investment account.
We plan to add $48,000 ($4,000 per month) to this account in 2021. This account is also invested in VEQT.
4). Continue to max out RESPs (and rebalance)
We'll continue our contributions of $416.66 per month into TD e-Series funds for our kids' RESPs.
Our kids will turn 12 and 9 this year and so we're getting closer to our target education date for when the kids will need to access this money. I've described RESPs as being like mini-RRSPs in that you need to de-risk the portfolio in a short amount of time as you get closer to needing the funds.
We find ourselves in the middle of that comfort zone when it comes to risk, since it no longer feels appropriate to be invested in 100% equities. To combat this I'll add the TD Canadian Bond Index Fund (TDB909) to the portfolio and rebalance to a 75/25 stock/bond allocation.
The portfolio is already worth $65,000, so that should buy them a couple of semesters of post-secondary education 🙂
5). Forego extra mortgage payments
I've thought about using our extra cash flow to put a bigger dent into our mortgage balance. But when rates fell earlier this year, our variable rate mortgage dropped to 1.45%. It just makes more sense to prioritize my wife's TFSA over paying down the mortgage faster.
For now, we'll forego any extra mortgage payments while we focus on other financial priorities.
Let me know about your financial goals for 2021.
This Week's Recap:
It was a pleasure chatting with Tom Drake on the Maple Money podcast earlier this month. Check out the episode to hear about my journey from hobby to side hustle to self-employed.
I also wrote about how our food spending has changed during the pandemic.
Remember travel? Here's a look back at our only trip of 2020 and how much it costs to go to Maui.
I'll be back next week with my year-end net worth update, plus our investment returns for 2020.
Weekend Reading:
Our friends at Credit Card Genius share how to get FREE checked bags when flying.
Here's a trifecta from Ben Carlson at A Wealth of Common Sense:
First, Ben takes a shot at ARK ETFs with a short history of chasing the best performing fund.
Next, Ben looks at what happens when you invest in stocks at all-time highs:
“According to my calculations, there have been more than 600 all-time highs since the start of 1988, or roughly 7.3% of all trading days.”
Finally, Ben looked at what happens if you only invested at market peaks. Spoiler: it's not that bad.
Dan Bortolotti takes a thorough look at some of my favourite investing products with this asset allocation ETF showdown between Vanguard and iShares.
Dan's colleague Justin Bender accompanies that post with this video comparison of Vanguard and iShares asset allocation ETFs:
Cameron Passmore and Ben Felix put together a terrific year-end recap show for the Rational Reminder podcast. A must-listen over the holidays.
Michael James reviews and recommends Annie Duke's new book, How to Decide. I also enjoyed this book, along with her previous best seller, Thinking in Bets.
Global's Erica Alini explains what to expect from your 2021 taxes and how to prepare.
We're not done with Ben Carlson, as he shares the 20 most important personal finance laws to live by in this Fortune column.
Rob Carrick on why people resist delaying CPP benefits – they think the risk is dying early but it's actually the opposite.
Finally, here's Jason Heath on what you need to know if you plan to keep working into retirement.
Happy Holidays, everyone!
