Save! Save! Save!: Our 2016 Savings Goals- Q1

You may have recalled that I started blogging on January 16th, 2016, about 1 month after my husband and I became completely debt free.  In hindsight I should have created this blog when I was going through my debt repayment journey instead of after and capture the highs and lows of that 2.5-year experience. However, I don’t think I was in the right mental space to do so and blogging was not even in my thought radar at the time. Oh well, you live and learn.

The exact date we finished paying off our $120k of student loan debt was Dec 15, 2015 paycheque. I remember, that day. It was a pretty great day.  We decided the splurge our Dec 30th paycheque and the amount we would normally put towards debt repayment we enjoyed spending during the Christmas & New Year’s holiday.

Even though we had nothing in savings, we had no debt either, and that was a great feeling. However, now we are both ready to take on 2016 with the same determination and drive we had in accomplishing our debt repayment goals, but instead of paying off debt, we would use that money to save for the future.

In the beginning of 2016 we both found ourselves at 30 years old, no debt and a net worth of about $7,000 combined (from retirement savings through old employers). We both felt like we had a lot of catching up to do in the savings department. If we were going to make paying off $120k in debt over 2.5 years’ worth it we would need to catch up on lost time and make the savings part as aggressive as the debt repayment.

So we decided to have a 2016 savings goal of approximately $43,000 (or $42,944 to be exact).

With no kids, a dual income and a very frugal lifestyle by most standards, we felt that this is more than doable. Obviously this is dependent on both of us working throughout 2016 and our incomes not going down.

To breakdown things a bit further, this $42,944 consists of $21,944 in long-term savings (i.e. retirement) and $21,000 in short term savings/planned spending.

Here is the breakdown of the goals and the year to date for me and my husband:

Short-term savings/ planned spending:

2016 Savings Goals

Goal Actual
1. Emergency fund $10,000  $10,000
2. Vacation fund   $3,000  $   3,000
3. Starter baby fund  $5,000   $  1,000
4. Education fund  $3,000  $   1,000
Total $21,000   $15,000

Long-term savings

2016 Savings Goals

Goal Actual
5.Retirement savings thru work (includes matching) $10,776 $3,468.75
6.Tax Free Savings Account $10,000 $0
7.Critical Illness (self-insure) $1,168 $292.00
Total $21,944 $3,614.75
TOTAL SAVINGS YEAR TO DATE $42,944 $18,614.75

Additional information:

  1. Emergency fund: as mentioned before this $10k in emergency fund was partially funded by a tax refund in March 2016. This helped us to quickly expedite our savings. The emergency fund is set aside for unplanned expenses like an illness, job loss etc. Because we need this money to be readily available, we used the GIC/CD deposit laddering strategy to take advantage of varies interest rate while eliminating risk
  2. Vacation fund: We are planning on taking a vacation to Hawaii this October. This would be our first vacation in 3 years since we began paying off our debts. All of our vacations since then have been ‘staycations’. These monies stay in a basic saving account with an online bank earning 1.81% promotional interest rate which will go down to 0.80% after July 31,2016.
  3. Starter baby fund: babies are expensive and although I don’t think this $5k will take us too far, it’s a start. On the bright side I have a lot of siblings and family who have already had children and I hope to get a lot of the clothes, car seat, stroller etc. donated. These monies stay in a basic saving account with an online bank earning 1.81% promotional interest rate which will go down to 0.80% after July 31, 2016.
  4. Education fund: these monies are set aside for courses we would like to take to help grow professionally or even out of interest. This account will also cover any costs I will incur when growing my blog site. At this current point, these costs have been minimal but I want to make sure the monies are there in the event we need to use them.
  5. Retirement savings through work: Our Registered Retirement Savings Plan (similar to a 401k in the U.S.) is one avenue we use to save for retirement. We put the maximum amount our company will match and direct the rest to our TFSA. Because we are still young we have a more aggressive portfolio so we can maximize returns in the long run. Our contributions towards this plan will result in even more savings when we claim our contributions as deductions on our tax return which would lower our taxable income increase our refund. This refund will be 100% invested into our TFSA accounts.
  6. Tax free savings account (TFSA): the TFSA is an account registered with the government of Canada that allows Canadian residents over the age of 18 to put money in this account and any growth in never taxed. The TFSA was started in 2009 and allows Canadian residents over the age of 18 to contribute monies up to a maximum each year towards this account. Any funds not contributed could be carried forward and contributed in future years. As of 2016 a maximum of $46,500/person can be put into a TFSA (assuming one had never contributed before) and the growth is never taxed. Monies in a TFSA can be invested in almost anything from stock/bonds to GIC or a basic savings account. We plan on taking advantage of this great retirement tool by working towards maximizing this room as the year’s progress. Of course all monies in our TFSA will be invested in stocks, bonds and some fixed income, with a long term position in mind. We will hopefully begin putting money in our TFSA by mid July 2016.
  7. Critical Illness (self-insure): a few months ago I did a post on how my husband and I got term to 65 life insurance of $750k each. Not knowing how much it would cost us, we had budgeted to spend no more than $250/month on life insurance for the both of us.  This was an amount that we felt our budget would allow without impeding our other long term goals. Well our monthly rate after being insured came up to $104/month for the both of us. Now before deciding to go with just term 65 life insurance, we had wanted to also add critical illness to 65 for $50k each as well. For these two plan for the both of us, we were given a rate of $213/month. Now after doing some more research on critical illness and going through our family health history (generally good health on both sides), we decided against it. Instead, we decided to self-insure the difference of $250/month (what we budgeted) and $104/month (what we pay for life insurance) which is $146/month ($250-$104) to put towards a critical illness fund.

 Why did we decide to self-insure for critical illness?

  1. Both me and my husband are healthy people and so are generally most of our family. Because we did not recall our family history suffering from any major illness before the age of 65, we were willing to not get insured for critical illness.
  2. Getting insured for critical illness costs a lot more than getting insured for life insurance if you compare what you are paying for versus what you are getting. We pay $104/month combined for a term to 65 life insurance policy of $750,000 each. Compare that to paying $109/month combined for critical illness coverage of only $50,000 each. Now $50k is a lot of money, but to pay $109/month for the next 35 years (from age 30 to 65) and possibly never need to use it seems like a waste to me.
  3. Compare that to banking it and investing/savings it yourself. If we put $146/month for 35 years (until age 65), that’s $61,320 ($140 X 12 months X 35 years). This amount doesn’t even factor in growth, just the principal savings. We plan on investing these monies as well once they grow to a certain amount. If we ever need monies for CI (for expenses not covered by the government) than we could pull it from this fund, if we don’t by the age of 65 than that’s just more money towards our retirement

So overall we have made a 71% progress towards achieving our short term savings goals 17% towards our long term goals. Our long term goals is where the real excitement is for us because I know that monies in these accounts will not be touched for decades to come so the growth potential is exciting. Any semi-annual bonuses from my husband work will 100% go towards our long term retirement goals, but I have not included these amounts as they vary each time. The first half of 2016 was largely spent on funding our short-term savings goals. But now that we are approaching the second half of 2016, I am looking forward to focusing our efforts towards our long term goals.

The idea is that by 2017, most of our short term savings goals will be fully funded and would not need replenishing for some time. This will allow us to put over 80% or more of our savings towards our long term goals in 2017. We will see how it goes.

How do you allocate your savings? How is your progress coming along?

Categories: Savings

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25 replies

  1. Firstly, congrats on paying off your debt and well done for all of your savings. You are killing all of your saving goals 🙂

    At the moment we have our 3 month’s of expenses emergency fund. All our other cash we are saving to do IVF treatments. Until we are successful with that, we don’t have any money goals.

    Tristan

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  2. We are at a different stage of life. When we started saving for retirement there were no TFSA’s. We always saved within RRSP’s and enjoyed the tax break. My husband has employer match for RRSP’s and he also buys extra. I have a defined benefit pension plan and I buy spousal RRSP’s. The money is automatically withdrawn from my bank account right on pay day. I will not be able to do this for much longer as I have almost maxed out my contribution room as it does not accumulate very fast with the pension adjustment.
    We bought 20 year term life insurance when we were about 30. The insurance agent tried to sell us 30 years but we knew that our children would be grown long before 30 years. We pay $32 month for that. We also both have life insurance through our jobs
    Right now we are right at the end of our mortgage. It is coming due in July and we will be making a lump sum payment to completely pay it off. All our extra money has been going into a standard savings account so we can use it for the final payment. I am amazed how quickly we can save when we really try. I feel like we could be further ahead if we had tightened our belts in our younger years,
    After our mortgage is paid we are planning to start making regular contributions to a TFSA. Our plan is that every extra penny will go into the TFSA until we max it out.
    We never had a formal emergency fund but I always had a $2000 cushion in our chequing account that was always useful for something unexpected. Our plan in the future is to use our TFSA as our emergency fund.

    Liked by 1 person

    • Very nice. You guys are killing it. Yes I am very thankful for the TFSA. We plan on making that as our primary retirement savings account because of the tax free gains and appreciation. Once that is maxed out we would use RRSP room over and above what we currently out to get the company matching. $32/month for insurance, wow. That’s pretty nice. Looks like you guys are on your way to financial bliss.

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  3. We have a similar approach with buckets for various short term and long term expenses. Holidays is one of these, next to a life happens fund for various bigger items. Most people would take these out of an emergency fund. I do not consider this an emergency.
    The Education fund sounds great.
    a baby fund is also nice. We have a similar kid fund that gets money to decorate the kids rooms and evolve at the room decoration as they grow older.

    Liked by 1 person

    • Wow that’s pretty impressive and very detailed. What would be the difference for you guys between an emergency fund and a life happens fund? Just curious as I currently lump these together. It would be interesting to read someone else’s perspective on this.

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      • We actually set aside each month a fixed amount in the life happens fund (the name is from our next life). This fund is supposed to pay to all the things that happen in life: wash machine breaking down, new oven, car repair… These are the things you know that will happen, just not when…
        In an ideal life, the emergency fund remains untouched all the time.
        The critique on this approach is that we have too much cash. Yes, we have and we sleep well at night!

        Liked by 1 person

  4. Talk about paying attention to details…. Well done. If the average consumer placed 1/2 the effort you do, the stress of financial worries would greatly diminish. You might want to consider in future postings simpler easier “starter” approaches to gaining control over one’s finances. Some people may be a little intimidated by your experience and your advanced knowledge. This would broaden the interest to your blog site as well.
    Congratulations again on all of your accomplishments.

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  5. You guys are doing so well 🙂

    Liked by 1 person

  6. I can’t wait until I have my student loan debt paid off and I can start saving hard core! This post is really inspirational to me and I may steal some of the categories you use (so organized)! Thansk for sharing!!

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    • Yah go for it. I look forward to following your progress. It will be a great feeling. I think it’s important that we all be an encouragement to each other. All the best on your debt repayment journey.

      Liked by 1 person

  7. I love this, you guys are so organised and rocking it, so much progress and it is not even May yet. Great balance between short and long term goals. Hawaii sounds fantastic.
    We have a savings goal for 2016 to pay extra off our mortgage and to save for half the cost of a trip to Japan next year. We are on track, so far so good. In terms of retirement, we are lucky in Australia our employers must pay a minimum of 9% into our retirement funds.
    We have 2 kids and I found it was the lack of income which is the main issue, depending on whether you get any benefits, not sure how it works in Canada. But you are right, you can borrow/get hand me downs from other parents – most are happy to see it being used again.
    Thanks for sharing.

    Liked by 1 person

    • Wow 9%, that is amazing. No such thing here in Canada. It really just depends on which employer you land and how long you work for them. My husbands work has defined contributions plan and RRSP matching among other retirement perks so he is more or less set if he continues with his current employer for a while. I get RRSP matching from my employer only. However, I can’t complain because that is a lot more than what some employers will offer. The upside of having a child in Canada when employed is that you can take 50 weeks off for mat leave and get 55% of your pay a month to a maximum of about $537/week which is almost $27k/year of taxable income. Not bad for staying home with your little ones as they grow.

      Liked by 1 person

  8. For us, 20 year term was enough coverage to get us through our child’s college years. We are debt free and plan to remain that way, so we don’t feel we need insurance past 20 years. Our savings and investments from being debt free would help the person should one person pass.

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    • Wow, that is great to hear. Yah intially we were going to do a 20 year term but we are starting out so late in the game from a financial standpoint and don’t even have kids yet so we wanting to make sure when we do have them that between our investments and income, they are well taken care of. Plus the price difference on the premiums were not that big so we got a longer coverage term.
      Its great that you have all of your financial ducks in a row. Alot of families don’t.

      Liked by 1 person

  9. You guys are killing it! Way to go for hitting so many of your savings goals! Does your baby fund goal include medical expenses? The reason I ask is because we had a baby last year and even with our co-insurance and the cost we’ve paid for baby formula, we still haven’t spent nearly $5,000 on our little cookie monster. I guess it could also depend on what area you are in as well.

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  10. You guys are killing it! Way to go for hitting so many of your savings goals! Does your baby fund goal include medical expenses? The reason I ask is because we had a baby last year and even with our co-insurance and the cost we’ve paid for baby formula, we still haven’t spent nearly $5,000 on our little cookie monster. I guess it could also depend on what area you are in as well.

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    • Wow $5k, that’s alot. To be honest this was just a blanket amount we came up with so that we start to save for it. There is no financial breakdown for the $5k. But I thought its better than not having anything in place at all. Of course with baby our incomes will reduce, but I hope to get on 50 weeks of mat leave which pays about $1,600/month in Canada (which is the max you can get). If and when I get pregnant I will look further into these expenses, but thanks for letting me know. It gives me an idea.

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