Aggressive Savings Plan for 2015
Although my financial goals for 2015 may seem a little ambitious, I have decided to create an aggressive savings plan that will ensure my success.
As someone who isn’t very good at tracking expenses and budgeting, I adopt the philosophy of “paying yourself first”. This form of saving will keep me honest in my expenses because I will only spend the money I have left over from my investments.
In short, I intend to save 70% of my work income this year. With this percentage, I am able to accomplish all of the goals that I have set for myself. Here’s a deeper look into how:
Goal #1: Maximize my 2015 TFSA Contribution Limit
As it stands right now, I have contributed 75% ($27,500) of my TFSA limit.
In my aggressive savings plan, I will be contributing $3000 a month until my TFSA is maxed. With $9000 left of contribution room, I will have this goal completed by March 31, 2015.
Goal #2: Maximize RRSP Account
Once my TFSA is optimized, I will begin to make contributions toward my RRSP. For the year 2014, I have $8000 in contribution room.
As for 2015, I have still yet to figure out how much I am able to contribute especially now that I have a defined pension plan. However, I estimate that my contribution room will be around $12,000 to $15,000.
Just like my TFSA, I will also be making a $3000 contribution every month. Assuming that my total RRSP limit is $15,000, I should have this goal completed by August 31, 2015.
Goal #3: Invest in a Property
One of the more exciting goals that I have for 2015 is the venture into the real estate market.
The plan right now is to save up $25,000 down payment for my first property. $15,000 of this amount will be taken out of my RRSP through the Home Buyer’s Plan. I will save up for the remaining $7000 after I have maximized my RRSP.
The deadline that I have set for this endeavour is by December 31, 2015.
Goal #4: Pay off Student Loans (Optional)
The only debt that I have is the dreaded student loan that I have been carrying around for quite some time.
Although it would be nice to be debt free this year, I believe that building my assets is much more important than paying off my 5.5% interest loan. This is why I have made this goal an optional one.
With that being said, once my TFSA and RRSP are maxed I will try my best to repay as much of the loan as I can. If I can knock off 50% of the $18,000 that I owe, I will already be satisfied.
Goal #5: Total Asset Worth – $85,000
This goal is going to be quite challenging but I believe it to be quite feasible. Here is how I plan to have my assets worth of $85,000 allocated:
- TFSA – $36,500 + $8,000 (Return)
- RRSP – $15,000 + $2,000 (Return)
- Property 1 Down Payment – $7,000 + $15,000 (RRSP HBP not included in total)
- Other – $16,500 (Savings & other methods)
- Total – $85,000
Although a little vague, the TFSA, RRSP and Down Payment ($7000) should be more than doable. As for the other savings, I have yet to figure out the plan to accomplish that. Perhaps I will be starting up an online business or generate positive cash flow from renting out my property.
That is it for my aggressive savings plan. I hope it works out as expected and I really look forward to seeing how this plays out.
With $25 000 downpayment, are you planning to go for an aggressive 5% down? 10% down? or the conventional 20% down?
With 20%, thats a budget of $125 000
With 10%, thats a budget of $250 000
With 5%, thats a budget of $500 000
Are you thinking of incurring Mortage Insurance in addition to your Mortgage Rate, Jeff?
Hi KingAce, the plan is to go 20% down payment for a budget of $250,000 property most likely a 2 bedroom condo and to go half in with others who may be interested in real estate.
Truth be told, I haven’t looked into mortgage insurance or anything to do with real estate yet. Right now, it is just something to fancy. However, once I reach my other goals, I’ll start doing more research on the subject. Will update things here on my blog.
Hi – hate to be Mr. Downer, as I like to think of myself and positive and optimistic, but I think the returns you are expecting on your RRSP and TFSA are way too high. You have 15 G’s in your RRSP and expect a return of 2000? That’s almost 14 % return. In your TFSA, which isn’t even fully funded yet, the return you would need to see is even higher. It doesn’t hurt to have lofty goals, but I think these are unrealistic and highly likely to set you up for failure and disappointment. Just my opinion of course, I wish you luck.
I appreciate your candour Chris. I realize my goals are really aggressive and ambitious but I believe that it is also feasible. I guess I will have to wait till the end of the year to see. Thanks for stopping by!
Hi Jeff
Like you, I used to pay my own self first before leaving the rest to the expenses. But please allow me to share another strategy which I am slowly implementing into my life right now.
I am currentky trying to pay my expenses first then pay my own self. The reason is because once we hv a specific expenses we tend to keep to that amount of expenses. Any future increase in our income we still attribute the same amount to our expenses and the increase will go to our savings or investment.
May work better maybe for some people 😉
Excellent advice B! Except that I am currently living at home and I have absolutely no expenses, just random doodads that I spend money on but once I move out on my own, I will take your advice. : )
Jeff,
With a well-planned strategy like this, I’m 100% sure you’ll nail your 2015 goal or at least come very close to achieving it.
Best of luck,
NMW
Thank you NMW for the encouragement!
I am pretty sure you will achieve your 2015 goals as well. : )
Forgive me to be ignorant on Canadian saving system. Do you have company match your saving? Say my company match up to 2%, if I contribute to the max early, so at the end of the year, they will stop the match, blaming that you didn’t contribute those months, therefore you’ll be losing out on the matching.
Also, it’s good that you contribute early and start generating early, but wouldn’t you want to average out your contribution incase the market dropped 20% then you are already at max. Of course it works both way, it could gain 20%, but it seems … Odd. If you could try to explain your strategy so I can learn, it would be wonderful. I love to hear other people’s perspective.
Hi Vivianne, my employer matches my contributions to my defined pension plan. I contribute about $100 week to my pension. Say that hypothetically, I quit my job in one year, I would have contributed about $5200. My employer will match another $5200 and will return 10400 to me upon resigning. With this plan, my RRSP limit will be reduced slightly. I guess the RRSP is similar to the ROTH ira. Unfortunately my company does not match RRSP contributions though.
Also, as for my investing strategy for 20%, I don’t plan on holding the index and my ETFs for the long term. I will buy when the S&P is under discount and once it reaches 20%, I will sell it to prevent it from going down again. I don’t know about the US but there is no penalty from selling early or any fees. This will be done in my tax free savings account, so there are no taxes as well. Of course, this only works in a bull market. When it becomes a bear market, I will just keep stocking up and wait for payday. : )
You shouldn’t have to worry about your RRSP limit yet. You should have a ton of room in there from all the years you worked before this year and as you know its cumulative. I would imagine unless you never worked a day in your life you have unused room.
I’d imagine I’ll have about $15,000 in 2015 and right now is the ideal time to contribute to my RRSP because I am in a relatively high tax bracket. However, I am still in the process of figuring out the role my RRSP plays in my plan.
So is your TFSA maxed yet?
Hi SJG, thanks for inquiring. Unfortunately, I am slightly behind schedule. I have $2000 more before my tfsa is maxed.