Sunday, January 4, 2009

2009 Family Budget



It was time for annual family meeting to discuss the budget for the upcoming year.  Click on the chart above to enlarge.  Every year since we've been married, my lovely wife and I discuss our annual goals and limits on our spending for a few hours on New Years Day.  This is the result of this year's meeting.

Some notable changes for this year is the aggressive mortgage paydown strategy.  We currently have a fixed rate mortgage for the next 4.5 years with fairly liberal repayment terms and our goal is to have the mortgage paid down to a level that could see us having it paid completely off through the following five year term.  In fact, if my pay rises and no unforeseen events occur, we could easily pay of the mortgage over a total of 6 years thus allowing us the freedom to use the cash flow for other purposes.  This is extremely ambitious and probably unrealistic but it is something we have set our sights on.

We are attempting to strike a balance between an ambitious RRSP contribution strategy and our aggressive mortgage paydown plan.  We also have allowed for some large one time purchases like a new television and some new furniture.  

Regarding our balance sheet, we expect that the value of our investments will not rise this year and we have planned that the value of our home will fall by 10% or more this year.  We bought it at 20% off peak pricing and I expect it will fall another 10% or more during 2010.  We have an extremely long time horizon (20+ years) for our investments so I am not concerned about the short term value of my retirement savings.

We have also increased our allotment to 'life and health insurance' and 'food and consumables' to account for our increased needs this year with an additional child coming.

Any comments?

6 comments:

ValueMonkey said...
This comment has been removed by the author.
ValueMonkey said...

I'm impressed you're targeting a 10-year payment schedule Mohican. Its not common these days. My Mom did it as a single parent in 5-years, but this was a different market and a different time. If I buy into this RE market, I'd like to do it in 5-10 years as well.

I have enough cash to make it a reality, but I have an internal debate whether to put the cash into the RE market or the stock market. Outside owning my own home, financial freedom is also a goal of mine. Owning a home may be a part of this equation, but not at current Vancouver prices.

ValueMonkey.

mohican said...

Yes, I was just discussing how times have changed with my father the other day. He recalls that it was commonplace for people to pay off their mortgages completely before their children left home. What a great example although it seems that many of those children did not take that example to heart!

I have tried to strike a balance between investing in my stock based portfolio or in paying off the mortgage and the mortgage won out by a bit this year. We are still contributing a great deal to our retirement accounts but it will be less than what we are paying down on the mortgage.

I see a career pull back or change once the mortgage has been paid off for a couple years. I think the freedom of having no mortgage payment will be quite freeing to pursue some other interests - perhaps post-graduate work.

ValueMonkey said...

... it seems that many of those children did not take that example to heart!

It seemed an easier formula for our parent's generation. My mother bought a home that was 2x her income (before taxes) and paid it off quickly. If we bought an equivalent home today in Vancouver it would cost at least 5x our household income and that's with 2 adults working, not just 1. Of course she had double-digit interest rates which is a lot of incentive to pay off quick. :-)

I think the freedom of having no mortgage payment will be quite freeing to pursue some other interests - perhaps post-graduate work.

I'm thinking similar thoughts. I enjoy my work, but I'd love to have free time to study something new. There's not enough time to do all the interesting things in life.

ValueMonkey.

NorthernGal said...
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aldrin james said...

Family Budget is very important because without it a family can't survive. That is why you need to be very serious in making a financial plan.

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