2014 was a good year in regards to net worth with a 50% annual increase. While 50% appears like a crazy high increase, it’s partially due to having a relatively low starting point! Half of my net worth increase was due to debt repayment (line of credit and mortgage) with the other half being attributed to savings contributions and market gains.
While the market has cooled off again and taken a pretty good hit in December, overall my investments have enjoyed an approximate 14% annual return since I started consistently investing a couple years ago. Using the rule of 72 that means my current investment amount would double in approximately 5 years (72 / 14). Sometimes it helps in times of market turmoil to take a step back like this to see the bigger picture to avoid a panic response.
My spending continues to remain fairly consistent over the last three years. There was certainly an increase three years ago when I landed my big boy job (better pay) mainly due to switching to three ply toilet paper and buying beer that my friends would actually drink when they came over (money well spent as far as I’m concerned). Typically, we tend to spend extra money as we earned it, so as I start to earn a bit more side income I’ll be conscious to ensure I stash it in a savings account rather than investing in beer empties.
I’m excited for 2015 now that my line of credit is paid off and my only big liability is my mortgage. This means I can really focus on contributing to my savings and paying down the mortgage. These two items are the focal point for my ultimate goal of financial independence (being able to provide enough earnings to cover expenses without actually having to work).
So, here’s my list of financial goals for 2015:
1) Max Out Ye Ole’ TFSA – Currently I’ve contributed $22,600 to my TFSA. The current CRA limit in 2014 is $31,000. This is the TOTAL amount you can accumulative contribute. Careful with the method in which you contribute and remove amounts from this account as the CRA is ruthless with penalties and the rules aren’t exactly straightforward (as is anything in the tax act). The CRA will be adding an additional $6,000 of contribution room in 2015 so that means I’m hoping to put $14,400 of contributions in 2015.
2) Save 45% of Gross Income – This is a very inspirational/aggressive goal for me. Gross income is defined as my total earnings BEFORE any deductions (taxes, CPP, EI). I’ve looked through my spending habits over the last year and can see there are certainly some areas to be improved (NOT speaking about TP and beer).
3) Earn $5,000 in Side Hustles – In 2014 I started doing some lite side work here and there over oDesk and other freelance websites. It was kind of invigorating to see people would actually pay me outside of my job for my skills. I’m hoping to keep the ball rolling in 2015 with a 25% increase. My best paying customer is my current full-time employer so I’ll make sure these side hustles don’t interfere with my day job.
4) Donate $500 to Charity – While giving away money seems to be counteractive to my goal of accumulating wealth it’s a balancer with respect to my total lifestyle. Writing a personal finance blog and having finance knowledge is helpful, but can also lead to an over emphasis on money. Wealth accumulation itself isn’t the end game; it’s to allow me to live the life I choose, which for me isn’t so much about money and stuff as it is experiences. Donating is a great way to bring back that perspective. However, the accountant in me can’t help it but to chime in here; it’s also a great way to beef up that tax refund!
5) Pay Down an Additional $10k on the Mortgage – My mortgage is up for renewal next year, which is also a good time to put any excess cash towards that balance. Interest rates, while currently outrageously low, continue to threaten to rise and when they do it would be nice to be carrying less mortgage. It’s funny to think about a year ago I was planning to move on up into a bigger more expensive house in 2015. Time has a funny way of changing our perspective and priorities, so looks like I’ll kicking around my current neighbourhood for a while longer yet.
Hitting all of these goals will be require some review and planning throughout the year. I also haven’t mentioned anything about my retirement savings plan contributions, which I’m still trying to figure out. The main goal is to save 45% of my gross income and all else will flow from there.
Let me know if you’re planning any big goals (financial or not) for 2015!by