the moneygardener 2009 financial goals

In my recent post, 2009, a new financial year, I talked about how I believe it is important to have a vision for what the upcoming year will look like for us financially and to write it down. Well we might not all have a blog, but I do, so conveniently I can write my 2009 financial vision/goals right here.

Current Situation
We are quickly approaching 30 years of age and over the last 4 years we've carried out some important financial steps toward building a secure, prosperous future.

• Started retirement saving plans for the long term
• Purchased a home and added features to make it comfortable
• Started a non-registered dividend stock investment portfolio for the long term
• Grew our careers through experience and further education
• Eliminated several inefficiencies such as gas guzzling, old vehicles, and multiple bank accounts
• As of October of 2008, when the market really went to hell in a hand basket, we made the decision to borrow money tax efficiently to invest into our non-registered portfolio
• My wife went back to work full time in December of 2008 after a year of mat. leave

Financial Vision For 2009

1. First and foremost, in keeping with my stated goal #1, in 2009 we want to continue to save at least $1,000 average per month for our non-registered portfolio. Ideally I'd like to save much more than this, considering that last year we managed to save an average of $1,395/month. This will enable us to be well on our way toward our goal of the portfolio being worth $175,000 (net value after any debt) in February of 2014.

2. 2009 will see us spend a good amount of money on home-related items. We will also spend some serious money on a vacation.

3. We will start 2 TFSAs (Tax Free Savings Accounts) in 2009 and contribute the maximum amount to both.

4. Over the past 3 months I've been using borrowed money to invest in our non-registered portfolio and paying it off in large chunks with saved money. I am expecting that this buying activity is largely completed and I will slow purchases now and concentrate on using saved money to pay back the line of credit. I am happy with the fact that I have now bought a good chunk of my portfolio at much lower prices and higher yields. This obviously depends on the market, but unless we breach the S&P 500 lows of the last few months I don't think I'll get excited about the opportunity to invest as often.

5. Our dividend income within our non-registered portfolio has grown from $1,523 one year ago to it's current level of $3,524. Savings and borrowed funds over the last year have really juiced our dividend growth. Over the next year I expect that this rate of growth will slow down dramatically as we rely on companies raising dividends for growth instead of mainly new funds coming in.

What I won't Aspire To Do:

Grow Net Worth By X% - This is a pointless exercise for me because I rely heavily on the stock market for net worth gains. The market is out of my control.

Accelerate Mortgage Payments - This just ain't how the moneygardener rolls. I've chosen sides already. Having a low interest mortgage and an interest in the long term prospects of investing I've set my mortgage payments on cruise control, and I like it that way.

Follow The Crowd - I'll march to my own drummer again in 2009 like I've always done. I don't care what the majority of people are doing and why. I'm sticking to our long term plan.

What does your financial 2009 look like?

4 goals update - end of 2008

About two years ago my wife and I set 4 long-term goals for our non-registered portfolio. I have these goals indicated on one of my Excel spreadsheets that I use to track my non-registered portfolio. The reason I have them there is so that I can see the 4 goals as a reminder, as well as to check up on my progress regularly. When creating these goals I tried to make them simply stated, specific, challenging, and of course realistic. I last updated my progress on these goals on June 1, 2008 here. Since 2009 is coming fast and my wife is now back at work, I thought a year end update is due to report our progress on these goals.

Goal #1 - Save an average of $1,000 per month to be added to this portfolio
Progress - For 2008 we've saved an average of $1,395 per month for this portfolio (not including these last 10 days or so). This is a tremendous result especially considering my wife has been on maternity leave for the year. I really would have never expected to accomplish this for 2008. It just shows what you can do if you put your mind and commitment to something. I may have to consider revising this $1,000 figure upwards!

Goal #2 - Keep our 'Buy Fee' under 2.0%
Progress - Currently our Buy Fee sits at 1.9%. This is something that is important to me, as I know the impact fees can have in investing. This fee should creep down as the years go by. I would expect the fee to get under 1.0% someday.

Goal #3 - Keep our portfolio dividend yield between 2.0% and 4.0%.
Progress - Currently our portfolio yield is 6.5%. This means that we are being paid 6.5% of the money we have invested annually. We are not meeting our goal in this area. The reasons for this are that a part of our portfolio was purchased to provide some additional income for my wife's maternity leave, and this section is made up of high yielding income trusts. The other reason for this is the extremely poor performance of the stock market. The original intention of this goal was to ensure that I was striking a good balance between growth and income, but I am starting to question the usefulness of this goal as this is really hard to quantify and put a range to.

Goal #4 - Grow our portfolio to $175,000 by February, 2014.
Progress - Currently our portfolio is worth $52,097, including some debt. This is the most difficult goal to gauge progress on. Looks like if we are able to save an average of $1,100 per month average (above all debt repayment), and we get an annual investment return of ~10% we'll meet the goal.

4 goals progress report

Last year I set 4 goals for our non-registered portfolio. Since June is now upon us, which marks about 6 months from the time I posted the goals, I'd like to update our progress toward these portfolio goals.


Goal #1 - Save an average of $1,000 per month to be added to this portfolio

Progress - For 2008 we've saved an average of $2,559 per month. This is a tremendous result especially considering my wife has been on maternity leave for the year. I expect this average figure to be peaked out right now and decline for the balance of 2008, as the month of April included some one time funds that won't be repeated this year.

Goal #2 - Keep our 'Buy Fee' under 2.0%

Progress - Currently our Buy Fee sits at 1.9%. This is something that is important to me, as I know the impact fees can have in investing. This fee should creep down as the years go by. I would expect the fee to get under 1.0% someday.

Goal #3 - Keep our portfolio dividend yield between 2.0% and 4.0%.

Progress - Currently our portfolio yield is 4.3%. This means that we are being paid 4.3% of the money we have invested annually. We are not meeting our goal in this area. The reasons for this are that a part of our portfolio was purchased to provide some additional income for my wife's maternity leave, and this section is made up of high yielding income trusts. The other reason for this is the poor performance of the stock market. If not for the recent weakness in the stock market our yield would likely sit just below 4.0%.

Goal #4 - Grow our portfolio to $175,000 by February, 2014.

Progress - Currently our portfolio is worth $45,875. This is the most difficult goal to gauge progress on. Looks like if we are able to save an average of $1,200 per month and we get an annual investment return of ~8% we'll meet the goal.

household savings rate feb '07 update

The last time I updated our household savings rate (HSR), (which is the amount of money we save for investments, as a percentage of our after tax income), was on September 30, 2007. By 'investments' I am specifically referring to my non-registered portfolio, my RRSP, my wife's RRSP, and now my son's RESP. Back then we were saving about 36% of our net income. At that time my wife and I were both working away at full time jobs. When our entire mortgage payments were thrown into the 'saving' category our HSR was 51% of net income.

Fast forward to the present day where my wife is taking a government allowance each month, maternity leave, and I am still working full time.

Here are the figures for the last 2 months:

January, 2008 --- HSR = 38%, HSR including mortgage = 58%
February, 2008 --- HSR = 44%, HSR including mortgage = 63%

Also, Goal #1 has been met for both months, as we've now saved $1,388 for our non-registered portfolio for the month of February.

I am extremely pleased with these savings rates. The improvement over late last year might have to do with a general mental attitude to spend less since we are earning less. Another explanation could be the actual reductions in our day to day living costs that come along with caring for a baby.

february links and updates

• I wrote a guest post for The Dividend Guy. Check out What Makes A Stock Defensive? The Ultimate Defensive Stock. at The Dividend Guy.
• My non-registered portfolio is yielding a staggering 4.5%, and is actually down 8.1% year to date while the S&P 500 is down 8.8% in 2008.
• Great Scott! Financial Jungle interviews one of my dividend investing mentors.
• So far we've saved over $600 in February for our non-registered portfolio, which puts us over 60% of the way toward our monthly goal.
• I am also opening an Registered Education Savings Plan (RESP) account, with TD e-series funds for my son. The little fella is going to own some Index Funds before he can hold his head up...

goal # 1 progress report

In a post back in November, 2007 I disclosed # 1 of our 4 goals for our non-registered portfolio.
Goal # 1 is : Save an average of $1,000 / month, to be added to this portfolio.

I thought I'd provide an update on our progress towards this goal since we are now a solid 2 months into my wife's year long maternity leave, which caused our employment income to decrease dramatically. Here are the results so far:
--------- December, 2007 savings = $1,351 -----------------
----------- January, 2008 savings = $1,518 -----------------

This is obviously a great result as these two months combined provide a buffer where we could save $130 for one month and still meet our goal. I am seeing some clouds on the horizon though, as we need to purchase a new set of tires for our car next month which will eat up a good chunk of potential savings. I will post soon with an updated Household Savings Rate (HSR), based on our new income and recent savings levels.

my investing philosophy

I am of the opinion that in order to be successful every long term investor requires some type of 'investing philosophy'. Simply put, these are statements that define my behaviour as an investor for the long term. This philosophy is the backbone my strategy as a whole.

It is especially important to have some investing rules to live by when the markets are as volatile as they have been lately. With the loud business media, falling markets, whining analysts, and frightened friends and colleagues all ringing in your ears - these statements will be your enduring battle cry that pushes you forward.

Here is my philosophy which can also be found on the right panel of this blog...

1. I am foremost a buyer of securities and seldom a seller, with a stalwart view to the long term.
2. I will only buy stocks that I would average down on. 'Average Down' - Means I will buy the same stock at a lower value to increase my holding and at the same time lower my adjusted cost based on the holding.
3. I will be patient, and disciplined, and always stick to my system.
4. I never worry or panic, and I always remember my initial reason for purchasing the stock in the first place.
5. Dividends are half the journey; meaning that a large chunk of total returns will come from dividends. It is also important to remember that dividends are always more stable than their underlying share values, and that the growth of dividends over the long term has a powerful affect.

I refer back to these statements sometimes to ensure I am on staying on the right track. Notice how there are no real specifics here, however the generalities really lend themselves to guide a certain mode of actions. Emotions can often crop up in an investor which one did not realize was present. These emotions can often lead to reckless actions or actions that take you away from your philosophy and therefore away from your goals. I find that having an investing philosophy in writing like this helps you combat these emotions, and aids you in being a 'solid Pine tree' among a plantation of withering deciduous shrubs and wavering annual grasses.

MG's 4 goals - (goal # 4)

About one year ago my wife and I set 4 long-term goals (which were recently refined) for our non-registered portfolio. I have these goals indicated on one of my Excel spreadsheets that I use to track my non-registered portfolio. The reason I have them there is so that I can see the 4 goals as a reminder, as well as to check up on my progress regularly. When creating these goals I tried to make them simply stated, specific, challenging, and of course realistic. I thought I would share these 4 goals for our non-registered portfolio in a series of posts. Goal # 1 was shared on my November 4 post, Goal # 2 on November 24, and Goal # 3 on my December 9 post.

Goal # 4

Grow our non-registered investment portfolio to $175,000* by February 1, 2014 (age 35).

*It is important to note that the $175,000 is in 2014 dollars, which will be worth less than $175K is worth right now.

How did I arrive at this goal?

First I'd like to give credit to The Dividend Guy, for introducing me to the calculator located here. I used this calculator to perform the following analysis:

There are 4 variables involved here:

1. Amount of money we can save each month (could be $1,000 - $1,600)

2. Starting Value (current portfolio value of $34,336)

3. Market return rate (could be 8% - 11%)

4. Number of months to end of goal (74 months)

To arrive at what I believe to be a realistic, yet very challenging goal I performed the following:

Scenarios

A - Save $1,000 per month & market returns 8% (low end & pessimistic)

B - Save $1,200 per month & market returns 10% (mid range & average)

C - Save $1,600* per month & market returns 11% (high end & optimistic)

*Keep in mind that over the past 20 months we have saved an average of about $1,500 per month. Also, our goal level of savings as per Goal #1 is $1,000 avg. per month.----------------------------------------------------------------------------------------------------------------------------------------------------------

Results (obtained by inputting scenarios into calculator):

A = Future Value is $151,400

B = Future Value is $185,567

C = Future Value is $235,804

The reason I selected $175,000 as the target value is because I wanted the goal to be challenging, yet realistic. If we can meet Goal # 1 (save avg. of $1,000 per month), we should be able to achieve $151,400 without any out performance from the market. I am anticipating that with some effort we can exceed Goal # 1, and this will put us ever closer to $185,567. The market is the wild card here, but if we can get a solid 8%+ out of the market, and still save around $1,100 - $1,300 per month we should be able to flirt with Goal # 4 which I set at an even $175,000.------------------------------------------------------------------------------------------------

Setting a goal like this is very difficult because you never know what will occur in life as well as in the market. The important aspect though is that we have some sort of framework to set goals in, and the fact that we have a mid term goal like this. Challenges to this goal include going through periods of reduced employment income (as we are currently in), as well as major downturns in the market. When I go back and evaluate our progress on this goal, I will have to take these challenges into consideration when measuring our performance.

I have included a chart below which outlines where this portfolio is coming from over the past several months:

MG's 4 goals - (goal # 3)

About one year ago my wife and I set 4 long-term goals for our non-registered portfolio. I have these goals indicated on one of my Excel spreadsheets that I use to track my non-registered portfolio. The reason I have them there is so that I can see the 4 goals as a reminder, as well as to check up on my progress regularly. When creating these goals I tried to make them simply stated, specific, challenging, and of course realistic. I thought I would share these 4 goals for our non-registered portfolio in a series of posts. Goal # 1 was shared on my November 4th post and Goal # 2 was shared on my November 24 post.

Goal # 3
Keep our portfolio dividend yield between 2.0% - 4.0%.
For example, we currently want a $35,000 portfolio to pay us between $700 and $1,400 annually. The rationale behind this goal has to due with my investing strategy. The strategy calls for investing in companies with a high current yield. By 'high yield' I am looking for a yield level above 2.0%. The reason I top the yield out at 4.0% is because in the current interest rate environment, a yield above 4.0% usually signals some type of growth expectation issue in my opinion. Examples of dividend yields greater than 4.0% that might come with relatively slow growth would be Pfizer (PFE), Bank of America (BAC), Bank of Montreal (BMO) or Consolidated Edison (ED). While growth can still be achieved with a greater than 4.0% yield in some companies, I don't want to overemphasize high yield in my stock picking and find myself with a portfolio yielding 5% that grows an average of 1% per year over and above dividends. Simply stated, I want to strike a good balance between share price growth and dividend payments.

Progress
Currently our portfolio is yielding 4.1% so technically we are not meeting this goal. I am going to excuse us for the time being because of our current heavy weighting in income trusts. This weighting will come down over time as our maternity leave financial strategy comes to an end.

Where this goal becomes a little cloudy is when you consider that economic times change and interest rates change as well. A yield range of 2.0% - 4.0% might seem appropriate now for my universe of equities that I pick from, but as interest rates rise my yield range perhaps should rise as well.

If anyone has an idea for a method to use to know when and how to adjust this yield range to fit my universe of stocks, I would be interested. For example should it be tied to some sort of bond rate, or other industry rate....?

MG's 4 goals - (goal # 2)

About one year ago my wife and I set 4 long-term goals for our non-registered portfolio. I have these goals indicated on one of my Excel spreadsheets that I use to track my non-registered portfolio. The reason I have them there is so that I can see the 4 goals as a reminder, as well as to check up on my progress regularly. When creating these goals I tried to make them simply stated, specific, challenging, and of course realistic. I thought I would share these 4 goals for our non-registered portfolio in a series of posts. Goal # 1 was shared on my November 4th post.

Goal # 2
Keep our 'Buy Fee' under 2.0%*

*What is meant by the term 'Buy Fee' is the percentage derived from the following formula:
(Commissions + other fees) / ((Total Purchase Cost - (Commissions + other fees))

Basically this is a measure of the fees we pay to invest divided by our total investment net of fees.

Progress
Currently our Buy Fee = 2.2%. We are not meeting this goal due to the fact that we paid some big fees for stock certificates in order to set up DRIPs during the first few months of this portfolio's existence. I expect this buy fee to continue to drop until I get it under 2.0%. I imagine I will maintain the fee at around 1.9% - 2.0% for the next five years or so.

MG's 4 goals - (goal # 1)

About one year ago my wife and I set 4 long-term goals for our non-registered portfolio. I have these goals indicated on one of my Excel spreadsheets that I use to track my non-registered portfolio. The reason I have them there is so that I can see the 4 goals as a reminder, as well as to check up on my progress regularly. When creating these goals I tried to make them simply stated, specific, challenging, and of course realistic. I thought I would share these 4 goals for our non-registered portfolio in a series of posts. I won't necessarily run the ' MG's 4 goals' posts consecutively, but I would like to share them over the next while. OK, let's get on with it...

Goal # 1

Save an average of $1,000 / month, to be added to this portfolio.

This means simply what it says. We want to save an average of $1,000 in cash every month for this portfolio. This $1,000 is over and above any dividends or distributions that the portfolio earns.

Progress

So far we are accomplishing this goal. Please see the bar graph below for more details. We have been able to save an average of $1,534.84 / month over the past 19 months. This overshoot will come in handy over the next little while as my wife's maternity leave will present a challenge to continuing to meet this goal.