Canadian Money Forum banner
21 - 40 of 110 Posts

·
Registered
Joined
·
30 Posts
Interesting thread, I have basically the same goal as you but I'm 27, make less money and I'm giving myself 15-20 years to do it.

I would say investing 70/30 stocks/bonds on a 9-year period is optimistic. Markets have had bad 9 year periods before, for example someone investing in 2000 and wanting to reach a certain goal in 2009. If reaching your goal on time is very important to you then you might miss the mark by relying so heavily on market performance. Don't let the great performance of the last 3 years fool you into thinking things will be like this forever. Maybe 2015 will be a total collapse of the economy, who knows; maybe 2016 will, maybe 2023 (which would be disastrous to your objective). I would suggest a more "balanced" approach, 50/50 or maybe 60/40. If however that million is just a benchmark and you plan on keeping most of that money invested after that, then your more aggressive approach may make sense, just keep in mind the markets won't necessarily do what you want when you want.
 

·
Registered
Joined
·
5,604 Posts
If however that million is just a benchmark and you plan on keeping most of that money invested after that, then your more aggressive approach may make sense, just keep in mind the markets won't necessarily do what you want when you want.
Potentially a million is a benchmark because you could live reasonably well off the dividend and/or distribution from that. I'm not sure though...just guessing...

At 3% dividend or distribution yield, that's $30k per year or $2,500 per month. If you have no debt, that's a decent income in a low-tax rate. Some of that income could be used/earned tax-free as well, (thanks TFSA :)

+1 Michel - re: "Just keep in mind the markets won't necessarily do what you want when you want."

I think for this reason, because no investor can predict their investment returns, living off the income earned from your portfolio is a more conservative strategy. The problem is, you need a very good chunk of the capital to do so.

On that note, it's certainly worth saving for. I'm sure a few CMFers are living off the dividends and/or distributions churned out by their portfolios, and are living quite comfortably because of it, not caring what the markets do or don't do. I'd like to be there some day. That's really FI. Your money is making money so you don't have to work.

Only time will tell if I'm getting there.

Michel and Scorpion_ca, you guys are young and thinking about this in your mid-20s. If you continue with the same mindset and focus, you'll "be there" in another 20 years which will be FAR AHEAD of most in your cohort.
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #24 · (Edited)
It's important to reach my goal but I would be okay if I don't reach there on time. I don't have any plan to retire once I reach my goal. As I mentioned previously, it will give me financial freedom and I will be able to do what I like to do.

I am not only depending in investment income but also in saving more to reach my goal. I read couple of books written by William J. Bernstein and he mentioned that young people should pray everyday that market should go down and I do the same. I didn't like that market has gained last three years as I had to pay more. I am hoping that market should go down in 2015 and onward that I could buy more.
 

·
Registered
Joined
·
30 Posts
I read couple of books written by William J. Bernstein and he mentioned that young people should pray everyday that market should go down and I do the same. I didn't like that market has gained last three years as I had to pay more. I am hoping that market should go down in 2015 and onward that I could buy more.
Amen! I dearly hope markets will crash as badly as possible this year, everything is terribly overpriced.
 

·
Registered
Joined
·
1,875 Posts
What is the significance of having $1M at 40? Would you be disappointed if you have $800K at 40 and $1M at 42? Why?

The goal sounds arbitrarily aggressive to me. It may be counterproductive, because it may push you to take unnecessary risk.

You may want to review Larry Swedroe's guide to asset allocation:

http://www.cbsnews.com/news/asset-allocation-guide-how-much-risk-should-you-take/
http://www.cbsnews.com/news/asset-allocation-guide-what-is-your-risk-tolerance/
http://www.cbsnews.com/news/asset-allocation-guide-how-much-risk-do-you-need/
http://www.cbsnews.com/news/asset-allocation-guide-dealing-with-conflicting-goals/

According to Swedroe, asset allocation decisions should be based on 3 factors:

ability to take risk
willingness to take risk
need to take risk

Come up with a solid plan that matches your ability, willingness and need to take risk.

Whether your reach $1M at 40, 42 or 45 depends on the market returns. They are out of your control.
I just got to this thread. Thanks for posting these links. To me this is very good advice.
 

·
Registered
Joined
·
2,892 Posts
If you earn $125 per year, spend roughly 20, taxed for another 25 or so.....the remaining $ invested would get you pretty close, factoring in compound interest as well. Your biggest enemy could be the GIC/cash portion of your portfolio.
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #29 · (Edited)
My expenses were around $20k and paid income tax around $29k last year though would get some refund due to RSP contribution. Income tax is a killer for a single person.

I bought some ZRE, ZPR and will buy some VCN this year.....trying to reduce my fixed income position.
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #30 ·
Net Worth Update -

Q4, 2014 - $205k
Q1, 2015 - $228k (around 11% gain)

Target to reach $300k at the end of this year but doubt it....company stopped contributing group benefits and other perks.....might not get bonus and increment this year....however, glad to have a job.
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #31 ·
Net Worth Update - plan was to reach $250k at the end of Q2, 2015 but could not reach there due to "Mr. Market" and additional $5.5k expenses.

Q1, 2015 - $228k
Q2, 2015 - $243k (around 7% gain)
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #32 ·
Net Worth Update - plan was to reach $275k at the end of Q3, 2015 but could not reach there due to 10% salary cut, took a vacation as well as market drop.

Q1, 2015 - $228k
Q2, 2015 - $243k
Q3, 2015 - $250k (around 3% gain)

So far, the average monthly expenses is around $1,650 in 2015. But it will increase in the next quarter because of one time auto insurance payment and boxing day shopping. Now focus is to save $10k for TFSA payment in Jan, 2016.

I have ZAG & ZRE in TFSA, ZPR & VCN in cash account and VUN, XEF, TDB900 & TDB911 in RRSP. I will sell TDB900 and TDB911 once the market is up and will buy more XEF.
 

·
Registered
Joined
·
3,216 Posts
My gross income is around $120-125k

My monthly moving average expenses is around $1,700 though I am trying to reduce it to $1,500.
Holy crap! That is your TOTAL spending you are talking about? Including housing?? That is damn impressive, particularly for someone at age 32 who makes so much money. You are going to hit that 1 million dollar goal in no time!
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #34 ·
Yesterday I was calculating my monthly moving average expenses for 2015 that is $1,720. Expenses include all costs including housing too. Our company has reduced our salary by 10% in Sep and they also stopped contributing 5% of our salary to group RSP at the beginning of this year. It might take little longer to reach my goal.
 

·
Registered
Joined
·
3,216 Posts
Very impressive. That includes vacations and unusual entertainment as well? Not just the core costs? I mean I could probably get my core expenses down to $1,700/month if I really tried, but throw in 10k for vacations and 2-3k in other one-off purchases each year and that blows the annual budget out of the water.

Pay cut is a minor hiccup, at least you still have a job! Myself I've had my bonuses cut by about 75% and overtime completely eliminated. About a ~$22,000 pre-tax loss :(
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #36 ·
Yup, that also includes mini vacations and entertainment but I have another expenses around $7k yearly that I give to my parents for their monthly expenses. They don't live here. So, they are able to manage their monthly expenses with that amount. I don't take much vacation at present as I am trying to reach my goal ASAP. I am getting tired of this North American crap to worry about jobs every couple of months. I think this cannot be a healthy lifestyle as to worry about job always.
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #38 · (Edited)
My plan was to reach $300k at the end of 2015 but could not reach there; however, I'm happy with the result.

Net Worth -

2013 - $125k
2014 - $205k
2015 - $276k (around 35% gain)

Expenses -

The average monthly expenses is around $1,680 in 2015.

Passive Income (Dividend & Interest) -

2013 - $805
2014 - $3,591
2015 - $4,650 (around 26% gain)

Asset Allocation -

Fixed Income - 25%
Equity - 64%
REIT - 11%

2016 target is to reach $350k.
 

·
Registered
Joined
·
5,604 Posts
Very well done scorpion_ca. You keep raising your passive income by 26% every year you'll have no problem reaching your financial freedom goals.

I had a decent 2015, my passive income (from capital invested) increased to about $11,750 per year. I will be writing a post about that in another week. I should crack the $12k barrier with the upcoming TFSA contribution room this month.

Those monthly expenses are very low. If you keep a high savings rate (for another 10 years or so), you're going to be very well off eventually.
 

·
Registered
Joined
·
1,099 Posts
Discussion Starter · #40 ·
Thanks MOA...

I could increase my passive income by investing more on dividend and preferred shares ETFs but I prefer 50% dividend and 50% capital gain at present as I think my income is high and I would like to pay less tax now.

Sometimes this passive income puzzles me as I received around $500 from ZPR this year but on the other hand I lost around $3,000 value of the fund though I do not have any plan to sell it in the near future.
 
21 - 40 of 110 Posts
Top