To quote one of my all time favourite books, Anne of Green Gables, “isn’t it nice to think that tomorrow is a new day with no mistakes in it yet?” And so, with the beginning of a whole new year of tomorrows with no mistakes in them yet, it’s fun to give ourselves a reset, a fresh start, to work towards new goals.
Last week I reviewed our financial goals from 2017, and so I wanted to move from that to discussing our financial goals for 2018. It is difficult to think too far in advance for this year because so much is up in the air once March hits and baby is scheduled to arrive. We haven’t made any final decisions with respect to maternity or paternity leave yet, so that also makes it hard to plan too far in advance… But, even if everything changes and I have to re-evaluate my goals in 3 months, I’d rather have something to work toward than not… So, here goes with my financial goals for 2018:
Goal #1: Emergency Fund
This goal has pretty much been a consistent goal for the last couple years. It seems that every December we end up pulling from the emergency fund for some reason (mostly excessive spending, this year partly renovations). And so when we start the new year, it is always a goal to rebuild and grow the emergency fund. This goal is basically identical to last year’s goal with 3 parts:
- Human Emergency Fund up to $10,000 (currently $5400)
- Pet Emergency Fund up to $5000 (currently $4090)
- Human Emergency Fund up to $15,000 (+$5000)
Unlike last year, I would like to break this goal down a bit further and have specific contributions for each part of the year, and have milestones to reach throughout the year, but I’ll go over that in another post.
Goal #2: Fund My Maternity Leave
As I mentioned, we are trying to save up to fund my maternity leave and help replace my income so that I can take some time off when baby arrives in March. This will probably be a bit of a dynamic goal because our financial situation will likely change in the coming months with my husband’s potential job change. Last year I had the goal to create a baby fund of $16,000, and we saved $10,000 of that.
I went over a few scenarios before, but with only 3 months left to save, I have to try and be both ambitious and realistic… Even though we don’t have any definite plans, I have decided that my current goal will be to grow the baby fund so I can be off work for about 6 months. My original estimates would have had the total required being around $27,000 but there is no way we are going to get from $10,000 to $27,000 in 3 months, unless we win the lottery or something, so I’m going to make this a little more realistic…
- Save $800 for Baby Fund in January
- Save $1200 for Baby Fund in February
- Save $1500 for Baby Fund in March
That will have a baby fund of $14,000 when I go on maternity leave… Not perfect, but better than nothing.
Goal #3: Decrease Monthly Spending
Last year’s goal of keeping the monthly expenses below $8000 was a failure because, although I wrote the goal down, and also reviewed it regularly, I didn’t really have any game plan as to how I would keep our spending down, or how I would correct it when things went over. This is going to be a focus for me this year. I will be looking at each and every category of the budget and seeing what it costs, what we can do to decrease it, and what alternatives there are…
The estimate that I used to calculate what was needed for maternity leave was $9000/month. This is a pretty good estimate since our average expenses from last year were $8900/month. But, if I could decrease our monthly expenses by $1000 or even $2000, we could probably get by with the $14,000 saved for maternity leave.
We have 12 master categories in our YNAB budget, so I’d like to review 2 of them each month to see how we can decrease them. That *should* mean that by July (month #7), we should have a much lower monthly spending…
And while we are working towards that I want us to keep each month’s spending below the average amount that was spent in that month the 2 years previous. This will be a good benchmark to see if we are actually decreasing our monthly spending each month.
So just to summarize this goal:
- Review 2 budget categories each month to try and decrease spending.
- Keep monthly spending below the previous 2 year average for each month.
Goal #4: Save for California Road Trip
Last year I had all sorts of goals to save for planned spending, but those were hard to track and so I’ve decided to leave most of those out of my goals for this year (although I guess technically my baby fund was one of those goals last year and is its own goal this year). That being said, we are planning to do a road trip to California in the fall to go to a friend’s wedding. Obviously, we don’t want to go in to debt for that, so we need to work on saving up for it. There are no definite plans in place yet, but I will work on that… We don’t really have any other travel plans, and likely won’t seeing as I am going to be figuring out how to be a parent for most of the year and won’t want the added challenge of traveling with a young baby… Our travel fund currently has only $600 in it.
So, this goal will be a 3 part goal:
- Make a detailed estimate budget for the road trip. (before March)
- Determine a monthly plan for saving for this trip between March and September. (once the baby fund has been “completed”)
- Keep to the budget while traveling on the trip.
Obviously, I will need to update you on this goal when I have more definite numbers and such.
Goal #5: Maintain Net Worth
In 2017, a bit against the trend, our goal with our net worth was to actually see a decrease as we spent a bunch of cash on our renovations. Now that those renovations are done, you would think that we would go back to a more traditional goal of increasing our net worth, but again we are bucking the trend, and are instead going for a goal of basically maintaining our current net worth… I’ve actually estimated a small decrease in net worth as my income will be cut, but generally it is just a re-organizing of our current money.
At the end of 2018, I hope that our RRSP (Registered Retirement Savings Plan) accounts will be up by about 12% and represent about 84% of our net worth. I want our TFSA (Tax Free Savings Account) value to increase by about 50% and represent about 8% of our total net worth. The big decrease (again) will be in our cash savings… I’m estimating a decrease of about -71% and having our cash savings only represent 6% of our net worth. And the final piece to our net worth calculation is our taxable investments, which I don’t plan to actually contribute to, but if the current investments follow what they have done the past few years, I am expecting an increase of about 20% (it seems high, but that’s pretty much what it has been doing the last few years… ) That would make it represent about 3% of our total net worth.
(I also realize that my percentages don’t add up to exactly 100%, but for whatever reason when I graphed this in my computer, the rounding of the percentages ended up that way in my graph… my spreadsheet has more detailed numbers, but graphs are nicer to look at.)
And now that I’ve put our goals on “paper”, there are a few things that I want to bring up that might totally take us off track…
First up is the leftovers of costs from last year… Our renovation is pretty much done, but there are still a few things to clean up, and I’m not exactly sure how much all those little things will cost (we all know how little things can add up quickly).
My husband is still finishing up his training, so we have some costs associated with that as well…
And then there is all the costs associated with getting ourselves set up for a new baby. I want to try and be as frugal as possible with all the baby stuff, getting hand-me-downs and used stuff wherever possible, but I know I need to be honest with myself when I say there will be expenses…
And… finally, we have something that may or may not come up this year to bite us… In the fall, when I took my car in for routine maintenance, I got the unfortunate news that there are some issues with my car’s engine that are likely to cost about the same amount that the car itself is worth… It’s currently drive-able, but it’s just a matter of time before the issues get worse and become critical… we made the choice to wait it out, rather than paying for the fix, or rushing out and buying a new or new-to-us car… But that might come back to bite us some time this year… I don’t have a plan for this yet, so I’m really hoping to have it just not happen this year… But if it does, we will have to re-evaluate.
So yeah, those are the other items that are on our financial radar for this year, even though they don’t make any appearances in our goals…
What do you think of our financial goals for this year? Are we crazy? Do you have financial goals for 2018?