My Financial Security Goals

              I am really enjoying writing this type of post right now. It’s one thing to tell you about how I paid off debt and bought a house, but that was never the end goal. My financial security goal is for my family not to worry about money, knowing that our expenses are covered and our savings are growing. It’s getting out of the cycle of poverty. Of struggling pay cheque to pay cheque. And of leaving my future in the hands of government money that won’t be enough to get by. I am working really hard towards these goals.

 This is my 6 step plan to go from low income to accomplishing my financial security goals.  

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Step 1. Buy a house

As you may be aware, this step was completed in December 2020. I’ve written extensively about that experience. This has had two major impacts on my family’s financial future. First, we now have permanent long term affordable housing, something that as renters, could have been taken from us at any moment. Even if I lost income or interests rates increase, the payments on the house should still be easily affordable. Second is of course equity. The value of my home is likely to continue increasing over the duration of ownership, and if a time comes when I wish to sell, I could walk away with tens of thousands of dollars in profit. As an added bonus, if we were to travel long term or relocate, we could rent out our home for roughly twice what it costs us, creating a second income stream.

Step 2. Pay off debt

              Of course this step started prior to the completion of step one, because it was a prerequisite for mortgage approval. And although I’ve splurged much more this year than last, I’ve kept my debt repayment ratio very high. Since my last update I’ve made astounding progress on paying down my credit card. My goal is a minimum of $1000 per month, which usually comes from my child tax. Additionally, I received a sizable tax refund, partly because of a home buyers credit. Yes, I know taxes are due in April, and every year I have very good intentions of sitting down in February and getting them done. But every year I procrastinate for far too long, and they’re usually completed sometime between May and October. Hold me accountable next year, I promise to try to do better. But anyway, as of this morning my credit card balance is down to less than $3000! I am now on track to be debt free by September of this year!

Step 3. Invest

Growing even a small amount of money over a long period of time is a key factor in my longtime financial security goals.

              Over the last 6 months I have directed an average of 36% of my total net income to credit card debt. In October, when that card is paid off, I will have a significant amount of extra cash freed up to make some big changes. There are a few things I could do with that extra cash. I could cut back my work hours from 4 days to 3 and still have enough money to cover my expenses. I could upgrade my lifestyle in some way, such as a new vehicle or home renovation. Or I can keep my expenses at relatively the same level and invest all of the surplus.

              Option 1 isn’t going to work, because I would no longer be classified as full time so I would lose my health benefits and the job security that comes with being full time. Plus I actually enjoy most aspects of my job, and it fits pretty well in to my life at this stage. I am only in the very early stages of learning about investing, and most sources I’ve encountered recommend investing between 10-20% of your income(more if you hope to retire early), so currently my plan is to invest a minimum of 20%, leaving the remaining 10-15% as discretionary income which will allow us to do some projects around the house and take a trip once a year or so. I’ll certainly get more into the details of my investments once I’m at that stage.

Step 4. Diversify my income

              Right now I have two income streams: Employment income and Government payments(child tax, gst etc). But I know that I only have so many hours that I am able or willing to trade for money, and that developing some kind of passive income is the best way forward. Investing will be a big part of this, but I’m exploring other ways of making money outside of work. I’ve been playing with some ideas in my mind, including taking this blog from a hobby to a business, but I have a long way to go. I do plan on spending time over the next few months sharpening my skills, and we will see where it takes me.

Step 5. Re-evaluate regularly

              Right now I have 3 debts: Visa at 12.99%, Mortgage at 1.79% and DPAP Loan at 0%. I’m using more of an avalanche approach to pay off the highest interest loan first. If being debt free was my primary goal, I would finish paying my visa off, then increase my mortgage payments to the maximum and work on paying that off as fast as possible. But I believe that with such a low interest rate currently, I can make more money from investing than I would save by paying off my mortgage, so that is the route I plan to take. Additionally, if all my money went into my mortgage, I can only access that equity when I sell, which I don’t plan to do in the short term, or buy taking out a home equity loan, in which case what was the point of paying it off in the first place? Keeping the bulk of my (meagre) wealth in a more liquid asset (easy to convert to cash) could make it easier to invest it in an opportunity that suits me, such as more real estate or a business.

On the other hand, I expect interest rates to rise by the time I need to renew my mortgage. If rates at that time exceed what I can safely earn from investing, I will need to look at ways to reduce my mortgage principle at that time. Keeping this in mind, I plan to invest in such a way that I could switch courses easily if needed. In the longer term, I understand that there could be any number of policy changes, economic bubbles and bursts or personal challenges that could threaten my financial security, and I need to be prepared to react when necessary.

Step 6. Entrepreneurship

              I’ve alluded to this a bit already, but this has been a dream of mine since I was a teenager. While I’m currently enjoying the reasonable level of security that I have as an employee, ultimately I want to be my own boss. I want to dedicate my working hours to building something for myself. I want to wake up each morning excited about what my day will bring. And pushing through the most challenging times should be for my benefit, not someone else’s. But the financial risk that comes along with owning a business is great, and I can’t take that leap until I know my family will be safe even if I fail.

This is not the path I was on prior to 2020. I always wanted to be an entrepreneur, I always wanted to own a home, travel, afford myself some modest luxuries. But too often, the money I had was not being allocated according to my goals, and so I never had enough to achieve them. With this plan, my money is being spent very thoughtfully on the things that will bring true long term satisfaction to my life. Knowing that even with a low income, my future financial security is in my own hands is a very powerful thing.

With Love

Melissa