[nobleea]

I thought I would start a thread so we can track our progress, put our goals down and have a bit of accountability. The back-story is available here:
http://canadianmoneyforum.com/showthread.php/79-Introduce-Yourself!?p=202356&viewfull=1#post202356

Long term goals:

Achieve 500K net worth at 35 (achieved mid-Sept 2013)
Achieve 1,000K net worth at 40
Partial retirement for me at 50.

Goals for 2014:
Net worth over 725K by the end of the calendar year
Paid off mortgage (fixed portion) in September
Purchased lot for subdivision and residential infill by end of calendar year
Take at least one month off in parental leave and possibly travel a bit with the new family.
Replace my car with something bigger, safer.
Open TFSA's for both of us.
Open RESP for the new addition and start contributing immediately enough to get full CESG.
Increase XIRR on non-reg portfolio from current 2.7% to 7%.

Current state:
Our gross household income is around $240K, not including bonuses. Bonuses are inconsistent, but healthy when they do occur. When my wife goes on maternity leave in early 2014, this will obviously drop, but she wants to teach summer school (3 weeks, $7K). If we put a gap in between maternity leave and her parental leave, this does not run afoul of EI rules.

Assets:

House - $453,050 (assume inflation increases of 0.25%/mo, 3%/yr.)
SUV - $25,425 (2013 model year. I depreciate it $175/mo which matches current asking prices)
Car - $2,825 (2000 model year. I depreciate it $75/mo. It's my commuting vehicle in the city)
Non-Registered Portfolio - $182,450 (smith maneuvre portfolio)
Work RRSP (mine) - $106,500 (contribute 5% of salary, company matches)
Pension (wife) - $40,250 (just her contributed amount)
Wife RRSP - $14,500
TFSA's - $0
Cash - $1,300 (two bank accounts)
Miscellaneous assets - $20,600 (camera gear, sporting gear, gift cards, electronics, etc)

Total Assets $847,000

Liabilities:

House mortgage - $91,500 (Prime-0.80%)
HELOC - $191,500 (Prime+1%, readvanceable used for Smith Maneuvre)
SUV Loan - $12,500 (0.5%)
Credit cards - $2,700 (this is not a balance, but the amount due. we pay off every month, but a true snapshot must include this)

Total Liabilities $298,200

Net Worth: $548,800

We've been averaging 30-40% year over year growth in our net worth for a few years. Hopefully it can continue, but at some point it will have to level off a bit.

I will be updating the numbers around the 9th of every month, starting in December. I welcome any questions or suggestions.

 

[Four Pillars]

You're doing well - good financial position and great income. I assume you are mid-thirties or so?

One point about the goals - some of them are not really in your control. I wrote my thought here:

http://www.moneysmartsblog.com/shooting-down-goals

Specifically the investment return and net worth stuff. I'd rather use things like "pay down mortgage by X$ by Dec 1, 2016" or "Contribute $N to TFSA by end of 2015.

Yes, you can affect investment returns to a limited degree, but if the markets tank - so too probably does your portfolio.

 

[nobleea]

Hi FP,

Thanks for the comments. You are correct, some times goals become unrealistic in that they are outside of one's control. They may reach the goals, but generally it was just because they existed, not because of something they did.

I can agree that the goal of XIRR to 7% is mostly outside of my control. Perhaps I should label that one as a Target, instead of Goal.
The Net Worth goal is still fairly accurate as 80-85% of the gain comes from savings. Granted, a drop in the markets would offset any gain in savings by a drop in portfolio value. So perhaps that becomes a Target as well.

As for ages, yes, I am 35 and the wife is 32.

 

[nobleea]

December 2013 Update

Small progress this month. It was an expensive month, costs-wise, as I bought flights for Xmas, reno items for a home gym in the basement and pretty much all the nursery items we require, and some winter tires/wheels for the wife's suv. Two of the stocks that make up a decent portion of my RRSP and non-reg portfolio took a bit of a dive over the past month (one of them my company stock). Nothing to be concerned about as they've been on a pretty decent run over the past year and I expect it to continue through 2014. I have also started to clear off some of the HELOC in order to make room for a lot purchase for residential development. This requires selling some stocks in the non-reg.

Assets:

House - $454,308 (+0.25%)
SUV - $25,075 (-1.4%)
Car - $2,750 (-2.7%)
Non-Registered Portfolio - $93,566 (-49% selling positions to clear off HELOC)
Work RRSP (mine) - $109,113 (+2.4%)
Pension (wife) - $40,975 (+1.8%)
Wife RRSP - $14,650 (+1.0%)
TFSA's - $0 (N/C)
Cash - $4,000 (+308%)
Miscellaneous assets - $20,600 (N/C)

Total Assets $765,037

Liabilities:

House mortgage - $82,955 (-9.3%)
HELOC - $111,230 (-41.9%)
SUV Loan - $11,325 (-10%)
Credit cards - $6,715 (this is not a balance, but the amount due. we pay off every month, but a true snapshot must include this)

Total Liabilities $212,225

Net Worth: $552,812 (+0.7%, +$4,012 month over month, +42.4% year over year)

 

[inverstmentmentjinja]

Are you employee or business owner , 240K seem above average of Canadian households

 

[nobleea]

Are you employee or business owner , 240K seem above average of Canadian households

My wife and I are full time employees. I do run a small photography business on the side, but it amounts to about 10% of the income above. Certainly an upper-middle class income.

 

[nobleea]

January 2014 Update

A decent month in December. I tried to push through as many prepayments on the mortgage as possible to reach the 20% yearly max, but was only able to get to 19.1% for the year - a decent amount to be sure. I received a year end statement for my wife's pension plan showing her contributions being a bit higher than I had assumed, so there's a bump in her pension amount (just her contributions). I have 4 weddings booked for 2014 and that's likely all I will take with a new child to show up in a few months. I am planning on taking parental leave this year, likely all of Nov and a bit of Dec. We plan on renting a villa somewhere in the caribbean (or hawaii) and do nothing. The mortgage will have been paid off for a few months by then, so we should have cash saved up to cover it.

Assets:

House - $455,444 (+0.25%)
SUV - $24,900 (-0.7%)
Car - $2,675 (-2.8%)
Non-Registered Portfolio - $94,234 (+0.7%%)
Work RRSP (mine) - $112,000 (+2.6%)
Pension (wife) - $44,360 (+8.3%)
Wife RRSP - $14,650 (+1.0%)
TFSA's - $0 (N/C)
Cash - $5,080 (+27%)
Miscellaneous assets - $20,750 (+0.7%)

Total Assets $773,709

Liabilities:

House mortgage - $77,414 (-7.2%)
HELOC - $111,230 (N/C)
SUV Loan - $10,450 (-8.4%)
Credit cards - $3,960 (this is not a balance, but the amount due. we pay off every month, but a true snapshot must include this)

Total Liabilities $203,054

Net Worth: $570,655 (+3.2%, +$17,843 month over month, +36.9% year over year)

 

[nobleea]

February 2014 Update

Well January was good in terms of things we had control over, such as reducing debt, but not good in terms of things we didn't have control over, namely the equity markets. We have a newborn showing up in 2-6 weeks, so things will certainly change around the house. Wife is already on medical leave (full pay) plus her employer has 6 weeks EI top up after birth, which is a nice benefit. We are on track to pay off our mortgage in September this year. The payments from that point to the end of the year will be used for a new (used) car for myself and paying for flights and accommodations while on parental leave somewhere warm later this year. Booked another wedding for 2014 (Oct) and some corporate photography. In January, I also did my annual photo fundraiser to raise money for Canadian Cancer Foundation. People get free photos in exchange for a donation, I match it and donate the whole thing. $1700 donated this year, $1650 last year. February and March is normally an exciting time since that is tax season, and for some reason I actually love doing it. This year will be especially nice as we have a large medical expense claim that should yield a nice refund.
I'm not bothered by the small drop in net worth. Out of the past 65 months where I have been tracking NW, I've had 16 months where it's gone negative on a monthly basis, but it's climbed 350% over that period, so I'll stick with the long term view.

Assets:

House - $456,582 (+0.25%)
SUV - $24,725 (-0.7%)
Car - $2,300 (-16%)
Non-Registered Portfolio - $58,450 (-38%)
Work RRSP (mine) - $108,998 (-2.7%)
Pension (wife) - $45,260 (+2.0%)
Wife RRSP - $15,500 (+5.5%)
TFSA's - $0 (N/C)
Cash - $1,625 (-68%)
Miscellaneous assets - $20,700 (-0.2%)

Total Assets $736,900

Liabilities:

House mortgage - $69,011 (-11%)
HELOC - $84,650 (-24%)
SUV Loan - $9,575 (-9.1%)
Credit cards - $4,900 (this is not a balance, but the amount due. we pay off every month, but a true snapshot must include this)

Total Liabilities $168,436

Net Worth: $568,254 (-0.4%, -$2,401 month over month, +31.3% year over year)

 

[Four Pillars]

Looks good!

One of the problems with net worth is that as your investment portfolio grows, the equity market swings influence the NW changes more and more to the point where the NW changes become meaningless.

ie you make $20k of contributions or debt repayments, but your portfolio goes up or down by $80k.

I found NW most worthwhile when I was starting out. At that time I had mostly debt and very little savings, so the net worth increases were a very good proxy to measure the debt repayment.

 

[nobleea]

One of the problems with net worth is that as your investment portfolio grows, the equity market swings influence the NW changes more and more to the point where the NW changes become meaningless.

That's a good point. Once the equity portion of the NW reaches a certain %, I might switch to a 3mo or 6mo rolling average for net worth calculations. That should smooth out big drops and gains without hiding the trend.

 

[OurBigFatWallet]

Well done, nice work so far! We are in a similar position as you. We live in Calgary. My wife is a teacher and I work in oil and gas as an accountant. Planning on having kids in the near future. Just curious what types of rewards programs do you use? Looks like you have the cash flow to be earning some decent rewards. We use the scotiabank momentum visa infinite and it works well. Also how will you handle childcare once your wife goes back to work? Some people have family look after their kids, some use day homes (expensive down here)

 

[nobleea]

Well done, nice work so far! We are in a similar position as you. We live in Calgary. My wife is a teacher and I work in oil and gas as an accountant. Planning on having kids in the near future. Just curious what types of rewards programs do you use? Looks like you have the cash flow to be earning some decent rewards. We use the scotiabank momentum visa infinite and it works well. Also how will you handle childcare once your wife goes back to work? Some people have family look after their kids, some use day homes (expensive down here)

Thanks. For rewards program, I use as many as possible but don't go out of my way to get extra points. Our main CC is the MBNA World smartcash, which isn't as good as it used to be, but cash back is still great and no annual fee. I'll be looking for a better cash back card this year and will get the wife's card transferred over as well. The travel rewards cards would work well for us, but they all seem to have yearly fees which I'm not a fan of.

Childcare, not sure yet. The plan right now is my wife will return to work part time, something like a 0.6FTE. Her mom will be retiring in that time and that is certainly an option we're comfortable with. I've budgeted $600/mo for childcare if it doesn't (for 2 days a week).

 

[OurBigFatWallet]

Good plan. For cash back you may want to consider the scotia momentum visa infinite if you spend a decent amount on gas and groceries. Annual fee is $99 though so only worth it if you spend a lot on groceries and gas to recoup the fee. I've never had MBNA but heard they took a dive when TD bought them out. My wife will also likely go on 0.6 or 0.5 FTE depending on what's available. You're lucky if you can have family help out (we don't have any family in town). Best of luck in your journey and be sure to keep updating on your progress

 

[nobleea]

March 2014 Update

February was a good month. Got a small bonus which went against the mortgage. Equity markets did well, with my company stock up 30% in the month (I am overweight on it). Our baby still has not shown up yet, due date was last Saturday. Received all the tax slips this month and it looks like we'll be getting a net refund of about $3,500 once I get around to filing in March. This month was the biggest single month gain ($-wise) in net worth I've had since I started tracking, though the majority of it is due to equity gains. In regards to my idea to do some infill development, a lot came up (still for sale) in a very nice area of town that is wide enough to split. Checked out some builders and got budgetary pricing on construction costs. I think the numbers work out very favourably, but it would mean selling a house in the 1.1-1.2 mil range and those don't sell quickly. Have to be able to carry something like that for a 6 month listing I think. I have a friend that has 3 infills on the go (side job from his main job) right now with one almost finished and to be listed this month. I would like to see how his experience goes first and learn from his mistakes/tips, etc. As for our house, we plan on start looking for a potential lot in late fall. No rush, if nothing comes up, we can wait for a year for the perfect lot (lot being a small, older house in our current neighbourhood for tear-down). The city is making changes to the zoning in mature neighbourhoods, which would allow for more freedom in the house design, so I would wait until that passes (2014) anyways.

Assets:

House - $458,000 (+0.25%)
SUV - $24,550 (-0.7%)
Car - $2,225 (-16%)
Non-Registered Portfolio - $66,796 (+14%)
Work RRSP (mine) - $123,357 (+13%)
Pension (wife) - $46,160 (+2.0%)
Wife RRSP - $15,700 (+1.3%)
TFSA's - $0 (N/C)
Cash - $1,508 (-7%)
Miscellaneous assets - $20,700 (N/C)

Total Assets $758,900

Liabilities:

House mortgage - $61,364 (-11%)
HELOC - $85,128 (+0.6%)
SUV Loan - $8,700 (-9.1%)
Credit cards - $4,180 (this is not a balance, but the amount due. we pay off every month, but a true snapshot must include this)

Total Liabilities $159,372

Net Worth: $599,524 (+5.5%, +$31,270 month over month, +37.2% year over year)

 

[DividendLuvr]

Looks fantastic, nobleea! You are killing the mortgage. And best wishes for the impending addition to your family.

If you are still looking for a good cash back rewards card, I might suggest MBNA Rewards World Elite. It's 2% cash back on all purchases with an $89 annual fee. Thing is, they waive the fee for the first year and also give you 10k welcome bonus points ($100 value), so they effectively wind up covering the fee for two years. I love this card for the time being, but will cancel it and move on to another option after two years.

 

[nobleea]

April 2014 Update

March was a life changing month for us, as we welcomed our daughter in to this world on the 9th. She was 7lb 13oz and full of hair - mom and baby are doing great and she's already giving us 5hrs of sleep a night. I opened an family RESP for her this month and am waiting for it to be converted to the e-series at TD before contributing, but we'll have no problem doing the max for this year to get the full CESG. As a bonus, AB gives a $500 grant at birth in the RESP. I do not plan on including the RESP in the net worth calculations, but may include the balance separately. It will be a couch potato type investment. We may some good progress on the mortgage, still on track for it to be gone in September. Equity markets were generous this month with one of the stocks I am overweight on up 30% in the month. Got a small promotion so that my pay scale and title reflect my actual work, this came with an 8% raise. Looking back at our goals for 2014, I don't believe I will be able to buy a new(to me) vehicle this year. According to the cash flow, it will likely be in mid-January, close enough I guess. I will be taking a month off in parental leave - we are likely going to go to Maui for 3 weeks. I can open TFSA's for both of us, but will have nothing substantial to contribute until 2015. With the house paid off, both TFSAs will be maxed out in 2015.

Assets:

House - $458,000 (N/C Keeping it constant for the next year)
SUV - $24,375 (-0.7%)
Car - $2,150 (-3.4%)
Non-Registered Portfolio - $74,236 (+11%)
Work RRSP (mine) - $123,708 (+0.3%)
Pension (wife) - $47,060 (+1.9%)
Wife RRSP - $15,750 (+0.3%)
TFSA's - $0 (N/C)
Cash - $876 (-42%)
Miscellaneous assets - $20,700 (N/C)

Total Assets $766,755

Liabilities:

House mortgage - $51,030 (-17%)
HELOC - $85,381 (+0.2%)
SUV Loan - $7,825 (-11%)
Credit cards - $3,718 (this is not a balance, but the amount due. we pay off every month, but a true snapshot must include this)

Total Liabilities $147,955

Net Worth: $618,800 (+3.2%, +$19,276 month over month, +39% year over year)

Chart of monthly net worth amounts since I began tracking them attached.

 

[nobleea]

May 2014 Update

April went by in a flash and thank goodness as the weather was all over the place. Our EI maternity benefits showed up today, finally, in a nice retroactive amount. I have money assigned to our daughter's RESP, just have not contributed it yet since TD sent our e-series conversion forms back over a missing void cheque. I haven't checked yet to see if the change has been made. My stocks were all over the place this month - one down 21%, another up 22%. Made some more progress on whacking the mortgage down, on track to having it paid off in mid-September. We had a fair amount of expenses this month - booked 3 sets of flights (some on points) for travel to California, Ontario and Maui, and booked a vacation home. Still have some more travel expenses to go. I have found a few infill lots that we like in our neighbourhood. This would be for our next home. The lots aren't for sale, but everyone has a price. They all have small, old homes on them that are currently rentals, owned by people in their 60's. Nice big pie lots whose backyards face south. Will probably cost us in the 350-400K range for the lot, and then another 450K or so to build the house. We'll sell our current house when it's time to move (expected spring/summer 2016). I hope to end up in the new place with a mortgage under 250K which will take us 5-10 yrs to knock out. The question I toy with now is whether to get a builder to take care of the whole thing, act as GC myself, or some combination. Even with the screw ups that will inevitably happen and the additional time from acting as your own GC, the savings can be substantial.

Assets:

House - $458,000 (N/C Keeping it constant for the next year)
SUV - $24,200 (-0.7%)
Car - $2,075 (-3.6%)
Non-Registered Portfolio - $71,148 (-4.3%)
Work RRSP (mine) - $132,772 (+7.3%)
Pension (wife) - $47,500 (+0.9%)
Wife RRSP - $15,504 (-1.6%)
TFSA's - $0 (N/C)
Cash - $5658 (+646%)
Miscellaneous assets - $20,700 (N/C)

Total Assets $777,457

Liabilities:

House mortgage - $41,766 (-22%)
HELOC - $85,627 (+0.3%)
SUV Loan - $6,950 (-13%)
Credit cards - $5,085 (this is not a balance, but the amount due. we pay off every month, but a true snapshot must include this)

Total Liabilities $139,428

Net Worth: $638,029 (+3.1%, +$19,229 month over month, +36% year over year)

 

[james4beach]

Congrats on your baby!

You're doing great. With a net worth over 600k you're not going to have any problems if you keep managing this well. A few suggestions.

Be careful how you value the SUV on the asset side. What would you get in the used vehicle market if you sold it hastily? Be conservative with the number for the SUV.

I'm scratching my head about why your TFSA(s) are empty. Do you realize you can do a contribution-in-kind, and move things like stocks (or anything else) you already have into the TFSA without selling it first? This is a beautiful tax shelter. Just take a look at your T3 and T5 tax slips. Are you paying tax on anything there? If so, see if you can transfer it into a TFSA.

Your cash amount strikes me as a bit low, given that you have plenty of total money, and you're a 2 people with a new baby. I recommend boosting cash. In fact I would suggest putting money into a GIC ladder, and sheltering that within the TFSA. The idea here is that you will totally shelter the interest income, and GICs will be maturing every year or so providing you available cash should you need it.

Your HELOC balance looks pretty high at 86k. I realize you've probably got a low interest rate, but why borrow ANY money --- why pay any interest at all -- when you have so much money? The bank of course will tell you it's a smart way to borrow etc but they're just trying to make business for themselves.

The point I'm trying to get at is, when you have enough money (which you do) I don't see why you should have any loans. I think the reality is that while you have strong net worth position, your liquidity is poor... not much cash or equivalents sitting around. This can be problematic for instance during job loss or a weak stock market, when suddenly you'll be forced to liquidate assets like stocks to make ends meet.

I think you should boost your liquidity and reduce your reliance on unnecessary loans like HELOCs. You're paying interest on loans, but you shouldn't even need those loans.

Personally I don't think it's wise to be heavily invested in your own company stock. The problem is that you're concentrating your risk exposure to your employer. If the company has trouble, then both your job and your stock investment are at risk. It's putting a lot of faith in the company. Back when I was receiving company stock, I immediately liquidated it as soon as I could to minimize my exposure to my employer. (By the way they did in fact lay us off, and the stock declined at the same time)

 

[james4beach]

Here's another question: What is your total cash & liquid investments? If you lost your job or suddenly need emergency money, how much do you have without having to sell your stock or long-term investments? You don't want to have to sell stock investments... it's going to kill your future returns.

I don't recommend relying on the HELOC for emergency money. Strictly speaking, HELOCs are callable loans. The bank can ask for the money back (unlikely) or they can prevent you from borrowing additional amounts (more likely).

Your house and SUV/car are not liquid. Your non-registered portfolio holds stocks... but do you have investments that could be sold for cash in a pinch, like short-term bonds? The RRSP and pension are obviously locked in too. How about your misc assets, can any of them be converted easily to cash in a pinch?

Otherwise you only have 6k of liquidity, not nearly enough for 3 people to live off for any amount of time.

There are many options to improve your liquidity. More cash, more high interest savings, maybe cashable GICs (I have some at my credit union).

 

[nobleea]

Congrats on your baby!

You're doing great. With a net worth over 600k you're not going to have any problems if you keep managing this well. A few suggestions.

Be careful how you value the SUV on the asset side. What would you get in the used vehicle market if you sold it hastily? Be conservative with the number for the SUV.

I'm scratching my head about why your TFSA(s) are empty. Do you realize you can do a contribution-in-kind, and move things like stocks (or anything else) you already have into the TFSA without selling it first? This is a beautiful tax shelter. Just take a look at your T3 and T5 tax slips. Are you paying tax on anything there? If so, see if you can transfer it into a TFSA.

Your cash amount strikes me as a bit low, given that you have plenty of total money, and you're a 2 people with a new baby. I recommend boosting cash. In fact I would suggest putting money into a GIC ladder, and sheltering that within the TFSA. The idea here is that you will totally shelter the interest income, and GICs will be maturing every year or so providing you available cash should you need it.

Your HELOC balance looks pretty high at 86k. I realize you've probably got a low interest rate, but why borrow ANY money --- why pay any interest at all -- when you have so much money? The bank of course will tell you it's a smart way to borrow etc but they're just trying to make business for themselves.

The point I'm trying to get at is, when you have enough money (which you do) I don't see why you should have any loans. I think the reality is that while you have strong net worth position, your liquidity is poor... not much cash or equivalents sitting around. This can be problematic for instance during job loss or a weak stock market, when suddenly you'll be forced to liquidate assets like stocks to make ends meet.

I think you should boost your liquidity and reduce your reliance on unnecessary loans like HELOCs. You're paying interest on loans, but you shouldn't even need those loans.

Personally I don't think it's wise to be heavily invested in your own company stock. The problem is that you're concentrating your risk exposure to your employer. If the company has trouble, then both your job and your stock investment are at risk. It's putting a lot of faith in the company. Back when I was receiving company stock, I immediately liquidated it as soon as I could to minimize my exposure to my employer. (By the way they did in fact lay us off, and the stock declined at the same time)

Thanks for the comments james. The SUV value is probably bang on for used car value. In a hasty sale, maybe knock a couple grand off. I can see no reason for a hasty sale.

Haven't gotten around to TFSA's yet. Contribution in kind wouldn't work. The non-registered account is remnants of a smith maneuvre (which explains the LOC balance). If I contribute in kind, I lose the tax deductibility of the HELOC. The net interest rate on the HELOC is lower than the mortgage rate, hence our attack on that.

I believe both our jobs are secure enough to not worry about a large cash savings. My wife is an award winning teacher. There'd have to be a >20% cut in staff across the Board before she was in jeopardy. My position is secure. I am close to being an international subject matter expert on the product. The product is a 2billion/yr niche of which my company has over 50% of the market. It's one of the crown jewels of the company. Even if the worst happened, a lay off would come with a healthy severance package and my skill set would be sought after.

On the topic of emergency funds, I sit on the side of the fence that believes that a HELOC is fine for such a rare event. Once the mortgage is paid off, if one of us lost a job, nothing would happen. We would be fine just on one income. We both have disability coverage through work. Doesn't cover everything, but there's a big enough gap between our income and expenses that it's not an issue. Not listed on the balance sheet are future receivables. Not sure how I would put that in. This is for weddings and portrait sessions booked/contracted for 2014, but not paid yet. If I were to lose my main job and get no severance, those bookings would be enough to carry us through the year (wife can't get laid off right now as she's on maternity leave).

Engineers are very by the numbers. I think I understand the risks well, but also understand the probability of said risks. One thing I do have to address soon, is some additional life insurance for both of us. It'll be Term10, as we'll be self insured after that.

In regards to company stock of course holding it increases risks, however I do not plan on keeping it forever. Somewhere in the 4-12month range. When our stock was languishing a year and a half ago, I was begging to be put on the stock incentive program, even offering a cut in pay to do so. Didn't happen unfortunately. If they stick to their plan, 50-100% gain from here over the next 12months is likely.