My Short and Long Term Financial Goals

Over the last few months I’ve been thinking about what the short and long term goals of my money are. I’m now in a savings routine, I have an accessible emergency fund should anything go wrong, and by the end of the year I’ll have about $45,000 across my portfolios.

With that said I’m not saving for the sake of saving and so I’ve set a few financial goals for myself that I think are feasible. My calculations are also conservative based on me staying at my current income for the next 10 years.

Short Term Goal #1: Investment Property

I’m planning on purchasing an investment property with my SO in 2021 and this is what most of my current savings is going to be put towards next year. I feel better about putting some of my money into an asset that will appreciate over the coming years and hopefully become an income source for us.

Short Term Goal #2: Value Based Spending

There are things in this world that I just think are worth the spend and for me that is travel. Travel brings me a lot of joy and I wouldn’t delay those experiences for an earlier ‘retirement’. At least a portion of my trips are usually covered through my credit card points (I’ve been using the same card for years) and it has at times paid for full vacations. This year alone I’ve racked up almost $1000 in points that I can’t wait to use once it’s safe to travel again!

Long Term Goal #1: Pay off the Mortgage

A shared goal of my SO and I (after we purchase an investment property) is to pay off our mortgage. It’s our single largest expense and we’ve each committed to aim for 20-25k in lump sum payments per year; that additional 40-50k will let us pay off the mortgage much faster (about 7 years), while still allowing me to put money away for my next goal.

Long Term Goal #2: FIRE by 40

I’m a huge admirer of the FIRE movement and I don’t really understand all the criticism. I love what I do! I don’t know that I’ll have the desire to fully retire for a long time – I have to be working or adding value somewhere. But wouldn’t you want to have choice? The choice to work or not work, or to only take on the work that you’re incredibly passionate about because you can? I also really believe that if you are doing work because you love it and not because you’re tied to the paycheque, you show up more authentically. You might be more bold, more innovative and less afraid to do your work truthfully. That to me is my FIRE goal. To get to a place financially where I take work only because I want to and not because I have to, and where that money is just a bonus.

What are your financial goals?

7 Ways Covid Changed My Finances

There isn’t anyone who hasn’t reviewed and re-assessed their finances in one way or another since the Covid-19 pandemic hit in March. Like many others, when the pandemic hit in Toronto I had no idea what to make of it. Would I only be working at home for a few weeks? Would I lose my job entirely? At what point would we return to normal?

For the first month of quarantine, bored and stuck at home, I shopped online. Excessively. New clothes for summer (because you know, the virus would be over by then), expensive skincare products, the works. And in April, probably as a result of both Covid-related anxiety as well as seeing the amount I paid off on my credit card, it really hit me how loose I’d been with my finances. I had gotten to a point in my career where I was making more money than I needed and rather than thoughtfully plan out where that money was going, I was spending it. Here are some of the biggest changes I made.

I built a zero-based budget

The first thing I did to get a deeper sense of where everything was going was build a big, beautiful budget in Excel and download the Mint app to track my transactions by category. I knew all of my fixed costs (mortgage and car insurance) were set up as automatic and 10% of my pay was automatically deposited into a TFSA each month. I knew I spent too much money eating out, and I knew that my discretionary spending was probably a little high.

When all was said and done, I went from saving 10% of my paycheque each month to saving 61% just by cutting down my variable costs and also really taking a look at what was truly fixed vs variable in my budget.

I eat at home

It was no surprise that a ton of my money was going to takeout and dining out rather than groceries, and particularly when you’re busy at work and commute, it’s easy to fall into bad habits. Grabbing a coffee on your way to work, buying lunch for $10-15, getting home too late to cook so opting for delivery.

I slowly started to meal plan each week and put together much more disciplined grocery lists which meant less waste, my grocery bill was cut in half, and there was no scrounging around my kitchen trying to figure out what to eat. We still do takeout about twice a week but when we do, we opt for cheaper spots. I also looked at where we were shopping – did we really need to shop at the higher end grocery stores when the prices were significantly higher?

Since this shift, I’ve found myself not only enjoying cooking but also excited that I can plan healthier and more vegetarian meals. I also get weirdly excited seeing an empty fridge at the end of the week knowing that we don’t have to throw out any bad produce or excess food.

I curbed discretionary spending

Prior to my Covid online shopping bonanza I thought I was doing relatively well in this category, and truthfully it wasn’t terrible. I’ve never been the person who has to have the latest and greatest and I definitely don’t have a penchant for anything designer, cars, technology or other expensive things. But I was still spending a few hundred dollars a month on STUFF. I’d see something on Amazon and order it. I’d go into a store for cleanser and come out having spent $50. I started with the easy ones and cut out things I didn’t use frequently, like Disney+ and Amazon add-ons. And for everything I thought about buying, I also started to ask myself: do you actually need this? (spoiler, it’s no 95% of the time).

Living below my means was the key to being able to increase my savings significantly, and after a few months it started to become fun. Once I started to see the impact, I’d find new ways of challenging myself to save money and be even more frugal.

I started investing

As I started to see the impact on my savings, I got more and more interested in learning about investing. I had always participated in my employer options, but I had never opted to do anything outside of that.

I started doing research and fell down the rabbit hole reading, learning and watching videos and it became clear to me that to get to the number I want in retirement, even with the most consistent saving practices, I would have to invest.  

I’m no expert and would never claim to be so I started with a Wealthsimple TFSA, investing into a high growth portfolio made up of index funds and a low percentage of bonds. Over the last few months there have been ups and downs but overall, I’ve seen about a 5% return. As I learn more, I’m sure I’ll expand into different forms of investment but for now, keeping it simple!

I upped my donations

2020 has been an eye-opening year. The pandemic lifted the veil on inequality for women and BIPOC while exacerbating existing issues globally and it’s never been more clear that there are so many people and organizations that need help.

So, I increased my monthly donations to two organizations and throughout the year have prioritized and made room for charitable giving. While it’s a personal decision and totally based on what is affordable for you, I really believe that money should be shared and that even a small amount makes a difference. If you’ve been thinking about supporting a cause but aren’t sure which organization to support, do some research. Look for charities that are accountable, transparent and financially healthy, because this means the organization is more effective on their charitable mission.

I looked into different ways to diversify my income

Finding multiple streams of income has really been a priority for me this year, so that if anything happened with my job, I would have more money and something else to fall back on. This year I took on a part-time job for 6 weeks to help beef up my savings and I’ve been building a portfolio of freelance writing to be a contributor in spaces that I know well – mainly HR. I’ve frequently held multiple jobs; when I got my first corporate recruiting job out of school I opted to also work part-time as a phone sales rep for almost a year on top of my 9-5. For most of 2018 I had a creative side hustle, and during university there was a period where I worked 3 jobs – a phone sales representative, a DQ employee, and an Avon sales rep (I know). Aside from a side hustle, my partner and I have also been searching for an investment property that will eventually become a passive income source for us.

I became a huge personal finance nerd

This was unexpected but if it had not been for the pandemic, I don’t know that I would have found this passion so quickly. I have eaten up every piece of information and enjoyed learning from financial experts, following financial blogs and millennial finance accounts, better understanding the stock market and just overall learning new ways to achieve financial independence.

So while Covid has been an extremely strange period to navigate, it has positively changed the way that I think about money. And if and when things do resume and return to normal, I know that I won’t be able to slip back into my former ways.

Financial Advice that No Longer Applies

A $1000 emergency fund is enough

There is tons of advice out there from money experts as to how much you should have in your emergency fund and it will vary on your ability to save based on your income as well as what you realistically need based on your expenses. Most experts recommend having 3-6 months of living expenses stockpiled away, while some more aggressively suggest having a full year’s worth of expenses saved.

One of Dave Ramsey’s well-known pieces of advice is to have an emergency account with $1000 in it before you start paying off any of your high interest debt. It’s not bad advice but it’s extremely arbitrary and very likely that it wouldn’t even come close to covering an emergency.

The goal of your emergency fund should be to minimize the long-term impact that an unexpected bill or job loss could make to your finances and while I believe that having 3-6 months of expenses saved up is the best route of action, I recognize that this isn’t possible for everyone and working towards having even a small emergency fund will help mitigate worst case scenarios like having to borrow money from a family member or take out a loan. 

If you’re looking to increase your emergency fund but don’t think you can increase your contributions, take a hard look at your income vs your expenses. Are there places you can trim, or things you can cut out entirely, even for a period of time to build up your emergency savings? Alternatively, could you increase your income through starting a side hustle or taking on a part-time job?

Save 10% of your paycheque

Again, this isn’t bad advice, but 10% should be considered your starting point.

Let’s say you’re 25 when you start saving for retirement in a TFSA or an RRSP, you earn $50,000 a year and plan to retire at the age of 65. You start saving 10% of your after tax income each month and end up with a sum of 390k at age 65 (taking into account a high investment growth rate of 6.26%) This sounds like a large sum but over a 30 year retirement, it may not be enough to sustain your lifestyle even with government benefits. Yes, this is not taking into account salary increases, bonuses or any other windfalls you may have, but it also isn’t taking into account other things that can happen like periods where you may not be working or years where expenses come up and you have less ability to save.

The most common guideline is to aim to replace 70%-90% of your pre-retirement income. This is personal based on your situation and what expenses you anticipate having in retirement. Will you still have car loan payments? Will your mortgage be paid off? It also begs the question, what KIND of a retirement do you want to have? Do you want to be able to take off at your leisure to sip mojitos in Cabo or visit the south of France? Or are you a happy homebody who plans on staying local and living a more minimalist or fixed lifestyle?

Talking about money is rude

Most of us grew up with the notion that talking about money is taboo, including myself. You don’t share good financial news (brag). You don’t share your salary with colleagues. You don’t ask how much your friend pays in rent even thought it might help you get perspective for your own search. WHY?

Here’s the thing: knowledge is power. When you collaborate, you are more likely to find resources and learn information that can help you become more financially savvy, get paid more or grow your wealth, just to name a few. People often feel a lot of discomfort around their relationship with money, sometimes feeling they don’t earn enough or are ashamed of their debt, but when you start having those conversations you’re more likely to find out that you’re not the only one struggling. And interestingly enough, not talking about money is the strongest amongst the middle class because they have the most anxiety over where they fall on the spectrum.

Not talking about money also has implications for your earning potential over your career. For example, equal pay for equal work. How do you know if you’re being paid fairly? How can you advocate for yourself effectively if you don’t even know where you stand? You don’t stand to benefit from not talking about money, but your company might (we all saw what happened with Conde Nast this year).

Remember that if you’ve ever had a question or a concern about money whether it be investing, saving or debt repayment, people in your life probably have too and they might stand to benefit from conversation as well.

Retire at 65

Technically speaking, the average retirement age across the public and private sectors in Canada is actually 63.6 but close enough.

With the gig economy and the FIRE movement amongst other things, retirement no longer looks the way that it used to and there is now more than one way to go about it. While there are still many folks who plan to retire at 65 (or are eyeing slightly earlier), there is also a growing population of people who plan on extending their working lives and never retiring, or conversely, those who have joined the FIRE movement and are aiming for an early retirement in their 30’s or 40’s through rigorous saving and investing habits.

There are also those who plan on taking mini retirements. Not to be confused with a vacation or a sabbatical, a mini retirement is taking time away from work for an extended period that is defined and clearly planned for to ensure your finances stay on track. Mini retirements can be as short as a few months or as long as a few years.

In short, we are redefining what we want out of retirement including when and how we get there. Those employed are also less likely to depend on their employer’s retirement accounts and lean more towards securing financial independence through their own actions.