Posted by As time marches on, things are always changing. In 2024, our family of three became a family of four. A democratic US president will soon become a Republican president. Inflation and interest rates are down, but cost of living continues to go up. S&P 500 hits record highs after sputtering in 2022. Change is inevitable.
Changing rates: From 6.01% to 4.26% mortgage interest
I love looking back at “2024 predictions” made at the start of the year and see how close I was to reality. I was expecting decreases of 25bps to 50bps in the BoC rates. We ended up with a whopping 175bps total decrease! Hallelujah! Variable mortgage rate holders rejoice!
Our mortgage repayment plan was always to increase our principal repayments to maintain our initial amortization timelines of 15-20 years. As rates increased in 2022, we paid more each month to offset the higher interest. As rates decreased in 2024, we pulled back on our voluntary payments as our monthly interest costs declined. Excess cash from reduced payments went towards our Baby LJ #2 cash fund.
Changing family: From one income to double income and back again
We had our two daughters 21 months apart from one another, but born only one calendar year apart (early 2023 and late 2024 birth dates). I returned to work from maternity leave #1 in February 2024 and was back on maternity leave #2 by October 2024. Within 9 months, we went from DISK (double income single kid) to SI2K (single income two kids).
Half of the 2024 financial goals went out the window the minute we realized we were expecting Baby LJ #2. Financially, it was unpleasant. We haven’t been able to fully contribute to our accounts for the past 2-3 years. But the dollars and cents don’t matter as much.
We have to (responsibly) live life outside of spreadsheets and account balances. Money offers financial flexibility, and financial flexibility offers choice. We chose to grow our family. We chose to go on a 12 month maternity leave to raise our newborn. Some others don’t have the financial ability to make their own choices and the decision is forced upon them.
Our kids are young once and the newborn age is so precious. Today, looking at our newborn, I felt this unbridled joy in that moment. So despite the lack of savings, it’s all worth it!
Changing priorities: Importance of Time
Before having our first child, I felt like we had endless amounts of time. There were late nights at work, but coming home I would still have time to watch a few TV shows before bed.
Now that we have a toddler in daycare, coming home at 5pm after work feels chaotic. It’s a gauntlet of post-daycare snack, dinner, playtime, bathtime, and wind-down before our toddler’s bedtime. After doing light chores like washing the dishes, it’s already 10pm and almost bedtime for us parents!
Nowadays, I am always on the search for “how to optimize time with a young family.” Or said differently, “how to spend money to buy back time”.
We’ve recently hired cleaners to come every 3-4 weeks to clean our house. I was reluctant to spend money on something we could easily do ourselves. But we ended up rarely cleaning the house because the task kept falling down the proverbial “to-do” list in a busy household. We ended up biting the bullet and hiring cleaners; one of the best decisions and ways to spend money to buy back time.
After maternity leave in 2025, I’ll start looking for some prepared meal delivery options. With one young toddler, our dinner time has been pulled up to 6pm, which does not work with a 5pm end to the workday. Now with two kids under 2 years old in the family, we’ll need to find a faster way to tackle dinner time.
Financial Goals Progress
To recap, our financial priorities for 2024 were:
| 2024 Goals | Year End Progress |
|---|---|
| Max contributions on company plan top-ups | 100% |
| Max out Ms. LJ RRSP | 80% |
| Max out both Mr. LJ and Ms. LJ’s TFSAs | 0% |
| Adjust payments on our variable mortgage to maintain <20 year amortization | 100% |
| Contribute $2,500 to Baby LJ RESP to maximize CESG matching | 100% |
Maxing out my RRSP: My RRSP will be maxed out in the first two months of 2025, which will reduce my personal taxes in 2024. I opted to delay my contributions until the new year, because I wanted to hold onto the cash for a bit longer. With only one income, I didn’t want to lock excess cash into RRSPs until the absolute last minute. Just in case we needed the money (or if we end up on zero income for unforeseen reasons!).
Maxing out both our TFSAs: We chose to not contribute to our TFSAs as we diverted cash towards baby #2 fund. We could have used the $14K room ($7K each for 2024) to tax shield some of the interest earned on the baby fund, but saving less than $150 in taxes wasn’t worth the effort of managing the transfers/withdrawals within our TFSA accounts.
Net Worth Update
Consistent with our 2022 update and 2023 update, I’ll focus on the controllable and non-controllable net worth components to gauge progress.
Within our control
Goals: Of our 5 financial goals, we’ve only met 3 of them by year end. Not what we expected at the beginning of the year, but life happens.
Savings & Contributions: Excluding Baby LJ #1’s RESP and Baby LJ #2’s cash fund, we contributed $48K to our investment accounts (vs. $57K in 2023), inclusive of employer match. Frankly, I am surprised our investment contributions were this high, as we diverted most of our cash towards the baby #2 fund.
Asset Allocation: We kept to our target allocation, which was updated at the start of the year. With everything within our deviation limits, no rebalancing is required. We still have some cash sitting in our investment accounts from dividends that needs to be deployed in January 2025.
| Target Allocation | Q4 2024 | Acceptable Deviation (<2.5%) | |
| Cash (excl. emergency fund) | 0% | 1.2% | Yes |
| Bonds | 0% | 0% | Yes |
| Canadian Equities | 27% | 25.4% | Yes |
| US Equities | 44% | 44.7% | Yes |
| International Equities | 29% | 28.7% | Yes |
| Total | 100% | 100% |
Mortgage: Our mortgage repayments significantly slowed down this year, as we didn’t make any excess repayments. We only repaid $26K (vs. $44K in 2023), which shouldn’t come as a surprise. In a maternity leave year, just keeping above water on the mortgage interest is (in my view) commendable.
With a second maternity leave year, I don’t anticipate 2025 to be an aggressive mortgage repayment year either.
Outside of our control
Portfolio Returns: The broader markets went bonkers this year. S&P 500 was up 23%. TSX was up 18%. These returns far exceeded expectations by analysts at the beginning of the year.
For 2024, my portfolio was up +24% (vs. +17% in 2023). Mr. LJ’s was up +22% (vs. +15% in 2023). These are great returns, but it’s important to recognize that it’s not going to repeat itself every year hereafter.
I was listening to Morgan Housel’s recent podcast on “A Tale of Tails”. He talks about how half of the companies in the S&P index was actually down for 2024. The bottom 5% were down 20%+. However, the S&P overall growth were driven by the top companies, mostly the Magnificient 7 and technology companies. The “tails” drove performance.
In online forums, there are users claiming significant gains (50%+) returns for the year, driven by overweighting investments in these “tails”: mammoth technology companies or cryptocurrency.
It’d be a lie if I said I wasn’t jealous. Of course there’s FOMO when you see others making outlandish returns. Logically, there will always be outliers who make out like bandits on stock picking or high-risk investments. Do I want to be an unlikely outlier that could make massive gains or take massive losses? Or stick with the averages with a diversified index portfolio?
I have to keep reminding myself that I’m unlikely to pick the right winning “tails” to invest in.
Overall
Lower mortgage interest and higher portfolio returns is the “financial synopsis” of 2024. But that is not what I will remember this year for. I will remember it being one where we welcomed our second daughter to the family. My personal life has never felt more fulfilled.
So while the spreadsheets are painting a fantastic outlook on our financial independence journey, it’s taken a step back in my life’s priorities. Life is meant to be lived outside of spreadsheets. And in that regard, I think we’ve met our goal.