Mark at My Own Advisor wrote an interesting post about his financial goals that gives me a chance to show how I evaluate financials goals. Most people look at each goal on a pass/fail basis, but I look at dollar amounts.
Mark was good enough to give enough financial details to make my type of analysis possible. In a few cases where I’m not sure of the dollar amounts, I’ll just make up a figure. I apologize in advance if I get some of the numbers wildly wrong. Without further ado, here are Mark’s goals that we’re evaluating for the first 10 months of this year.
Goal # 1 – Increase mortgage payments by $200 per month
This amounts to $2000 over 10 months. He achieved this one:
Goal # 2 – Contribute $5,000 each to TFSAs
Mark achieved this one for one TFSA, but not the other.
Goal # 3 – Optimize our RRSPs
Only Mark knows how much he is saving per year on MERs here. I’ll call this one $1000.
Goal # 4 – Continue my full Dividend Reinvestment Plan (DRIP) with Bank of Nova Scotia
Mark achieved this one for $100 per month.
Goal # 5 – Start my full Dividend Reinvestment Plan (DRIP) with Fortis
This one is not as complete as the BNS DRIP. I’ll guess that he achieved 50%.
Goal # 6 – Build up our emergency fund to $10,000
This one didn’t go very well for Mark due to some big expenses, including a new roof. He had to dip into a line of credit.
Achieved: negative by the amount of Mark’s LOC balance
The overall scorecard comes to
Achieved: +$9500 minus LOC balance
So we see that how well Mark has done so far this year depends greatly on the size of his line of credit. If it is big enough, then he has actually lost some ground despite achieving most of his financial goals. I suspect that Mark is actually on a good path, but many people have a line-of-credit problem that masks poor personal financial results. It doesn’t matter if you’re saving money in all kinds of different accounts if your line of credit is growing faster than your savings.
In summary, my preference is to rate personal financial results with dollar amounts rather than taking a pass or fail on each goal. This can be depressing if it turns out that your line of credit makes your overall results negative, but it is better to know if you’re losing ground rather than being misled by achieving several small goals.