Welcome to the Million Dollar Journey March 2017 Financial Freedom Update – the first update for the year. For those of you new here, since achieving $1M in net worth in June 2014 (age 35), I have shifted my focus to achieving financial independence. How? I plan on building my passive income sources to the point where they are enough to cover our family expenses. All within the next 5 years. If you would like to follow my newest financial journey, you can get my updates sent directly to your email, via twitter (where I have been more active lately) and/or you can sign up for the monthly Million Dollar Journey Newsletter.
In my first few Financial Freedom updates, I talked about what life has been like since becoming a millionaire, why I like passive income, and our family financial goals going forward.
Here is a summary:
Our current annual recurring expenses are in the $50-$52k range, but that’s without vacation costs. However, while travel is important to us, it is something that we consider discretionary (and frankly, a luxury). If money became tight, we could cut vacation for the year. In light of this, our ultimate goal for passive income to be have enough to cover recurring expenses, and for business (or other active) income to cover luxuries such as travel, savings for a new/used car, and simply extra cash flow.
Major Financial Goal: To generate $60,000/year in passive income by end of year 2020 (age 41).
Reaching this goal would mean that my family could live comfortably without relying on full time salaries. I would have the choice to leave full time work and allow me to focus my efforts on other interests, hobbies, and capitalistic pursuits.
To give you context for this update, here are the numbers in my previous financial freedom update.
December 2016 Dividend Income Update
Account Dividends/year Yield on Cost SM Portfolio $5,600 4.04% TFSA 1 $1,956 4.53% TFSA 2 $2,250 4.67% Non-Registered $210 1.37% Corporate Portfolio $8,300 3.54% RRSP 1 $4,800 3.55% RRSP 2 $520 2.68%
- Total Invested: $631,439
- Total Yield on Cost: 3.74%
- Total Dividends: $23,636/year (+15.5%)
Since December, there has been little change to our financial situation. In fact, it has been more go-with-the-flow type mentality. In a previous update, I announced that my spouse took the leap and resigned from her professional healthcare career. Since she was on a leave of absence for the previous two years anyways, there was very little financial pain with the move.
There has actually been some financial benefit to leaving her position, namely her pensions. One pension has already been transferred to a LIRA with Questrade, but there is a larger pension that I’m currently dealing with. We have the option to leave the pension in place until the age of 60, but we are in the process of taking the inflated commuted value (due to the low-interest rate environment) lump sum and investing it ourselves. I’m still contemplating the investment strategy for the new money, but it will likely be along the lines of indexing with ETFs. Boring but effective!
We still live off my government salary, and we still pay close attention to our spending (here is a breakdown of our expenses in 2015 ). Since we do not have any large debt servicing requirements (mortgage, rent, car payments etc), my salary allows us to live comfortably, but far from extravagantly.
Now, let’s talk a bit about my passive income strategy – generating dividend income. As dividends are the main focus of my passive income pursuit, there is a large dependence on the market. While there are merits to this investment strategy, there are also substantial risks – particularly dividend cuts. The goal of the strategy is to pick strong companies with a long track record of dividend increases.
On the topic of dividend increases, 2017 is off to a great start. It’s only the first quarter, and there have already been a large number of dividend increases in my portfolio. I received a raise from:
- TD Bank (TD); Scotiabank (BNS); Magna (MG); Royal Bank (RY); CIBC (CM); TransCanada (TRP); Great-West Life (GWO); Thomson Reuters (TRI); Manulife (MFC); BCE (BCE); Enbridge (ENB); Canadian Utilities (CU); Canadian National Railway (CNR); and, Metro (MRU).
In addition to the dividend raises, I’ve continued to deploy corporate cash into dividend stocks which has resulted in the biggest contributor to dividend income growth ($8,300 annually -> $9,700 annually). Since this is currently my largest investment account, it also adds the most weight to my overall holdings.
In my overall portfolio, here are my current top 10 largest holdings (besides cash):
- Bank of Nova Scotia (BNS);
- TransCanada Corp (TRP);
- Fortis (FTS);
- Bell Canada (BCE);
- Emera (EMA);
- Canadian Utilities (CU);
- Enbridge (ENB);
- Royal Bank of Canada (RY);
- iShares Core MSCI All Country World ex Canada Index ETF (XAW) (mostly from my wife’s RRSP); and,
- Manulife (MFC).
March 2017 Dividend Income Update
|Account||Dividends/year||Yield on Cost|
- Total Invested: $679,450
- Total Yield on Cost: 3.86%
- Total Dividends: $26,210/year (+10.89%)
Through a combination of deploying cash and collecting those juicy dividend increases, the start of 2017 has been strong with a 10.9% bump in dividend income. With the financial goal of $35,000/year by the end of this year, I will need to stay aggressive in deploying savings capital into yielding positions.
We still have a long way to go, but for the most part we are moving in the right direction. There is cash available to deploy in most of our accounts. That’s in addition to the dividends that are constantly being churned out which gets deposited as cash and reinvested again (the power of compounding). You may notice that RRSP 2 is also fairly minimal in dividends, that’s because that is my wife’s RRSP, and it is 100% indexed.
If you are also interested in the dividend growth strategy, here is a recent post on how to build a dividend portfolio. With this list, you’ll get a general idea of the names that I’ve been adding to my portfolios.
Let me know if you have any questions by leaving a comment.