Our 3 Competing Goals of Personal Finance
When it comes to personal finance, the 3 big financial goals / milestones for me and my family are:
#1: šInvestments / Retirement
#2: š HouseĀ
#3: š»Vehicle
Which are basically competing goals.Ā
Allocating money to one category, like a car payment, directly impacts our ability to invest or save for a house.Ā
So, where are we at with these goals?Ā
š” YELLOWā Investments
š ORANGE ā House
š¢ GREEN ā Vehicle
#1 š INVESTMENTS (š”)
For the past 6 years, from ages 29-35, there has been a heavy focus on investments. In particular, I was obsessed with maxing my TFSA.Ā
Even though we still havenāt met our investment goals, this investment category might actually deserve a GREEN š¢. It depends on who is doing the evaluating. I am a harsh critic, so I set the bar high.
Compounding interest is the 8th wonder of the world and allā¦
The one major thing weāre still trying to achieve: Maxing my Wifeās TFSA.Ā
I like to think that Iād be satisfied with our investment / retirement portfolio once her TFSA is maxed.Ā
Contributing $7000 per year to oneās TFSA is already a pretty challenging task.Ā
Catching up on the unused room at the same time? Even harder.
You can build a plan to achieve it. For example, contribute 10k a year, which implies a 3k catchup annually. But if your available TFSA room is large, then this can still take many, many years.Ā
Given our current situation: 2 young kids, and maternity leave debt. This investing goal will take time to achieve unfortunately.Ā
More importantly, making progress on the other 2 goals has become a higher priority.
We have her stuff set up and automated for $500 bi-weekly contributions. Or about $13,000 a year. Or a 6k catchup per year.Ā
Which means her TFSA will be maxed in approximately ~10 years. Which is way too long imo, but I have to balance goals.
#2 š HOUSE (š )
For the house, weāre thankful to have one. Our current āstarter homeā is still our first home.Ā
But to be frank, Iād give us a big fat red š“ rating on this category.Ā
When I was a young lad I would have hoped to own a home and a cottage by now. Similar to the one I was raised in. But again, the world has changed since then.Ā
Realistically though, a yellow or an orange is probably a fairer rating.Ā
I spent the first 4 years of my career completely focused on saving for a house. I didnāt even know how to invest in a TFSA at this time. This goal was met in 2018.Ā
This house was never intended to be the one to raise kids.Ā
I bought it myself about 8 years ago. It was basically all I could afford at the time on my single salary. The only real requirement I had at the time was a fenced in backyard for my dogs.
We had roughly planned to stay here ~5 years.Ā
We are currently 8 years into that 5 year plan LOL.Ā
With many things like covid changing the game, it hasnāt really made financial sense to upgrade. For the recent past, weāve instead focused on investing and popping out babies.Ā
Now with my kids quickly growing up, it's becoming more and more of a priority to move into a family home that meets our current life situation.
#3 š» VEHICLE (š¢)
For the vehicle, this became the biggest pain point in our lives.Ā
This was a RED š“ rating 18 months ago. At which point we finally pulled the trigger and upgraded our family vehicle.Ā
2 kids and 2 big dogs dictated this.Ā
My wife and I are tall also, so it was like a literal clown car packing up for trips.Ā
Dogs in the trunk, kids in the back, gear in the roof tote. With car seats forcing our seats forward it was very uncomfortable doing long trips.Ā Ā
We do 4+ hour drives all the time, so transportation is a big part of our life equation that cannot be ignored.Ā
The rise of costs in vehicles, similar to houses, was again a big factor here. Stupid Covidā¦
Also in general, it's really hard to commit to a large car or mortgage payment when instead that could all be going into investmentsā¦
We put it off for as long as we could, I drove my cheap manual car for 11 years. But eventually we pulled the trigger. I am way happier with that decision than I thought Iād be!Ā
When I initially signed the dotted line, my heart sank and I thought I had made a terrible financial decision.
No regrets now.Ā
Every decision is a tradeoff though.Ā
A large car payment still negatively affects our ability to upgrade our house and our savings rate.Ā
Buying a bigger house will hurt our savings rate even more.
Itās a balancing act dictated by your stage in life.Ā
Personal finance isnāt about maximizing one goal, like your portfolio. Itās about balancing competing goals as life changes.Ā It always feels like there is a mountain to climb.
Our priority in life right now is our kids, and providing the kind of life we want for them.Ā
Cheers š»
