Welcome to the Million Dollar Journey May 2009 Net Worth Update the mortgage pay down edition.

As I mentioned before, we are going to get aggressive in paying down the mortgage.  Having said that, we have dumped most of our savings onto the mortgage along with increasing our payment by about 50%.  The result is a 50% reduction in our mortgage balance with the end in sight.   The plan is to have the mortgage completely eliminated before our mortgage expires in a little under 2 years.

As with most equity investment accounts this past month, our portfolios have experienced a significant boost due to a rising market.  The 15%+ gain in the RRSP is due to a $5,000 contribution + gains.  The leveraged portfolio gains (+9%) however, are all organic.  I would actually be happy if we had another market correction as I still have quite a bit of cash to deploy (HELOC).

You may have noticed as well that our vehicles have been depreciating at an accelerated rate.  That’s intentional as I am looking to take the cars off the balance sheet soon.

Assets: $441,650.00 (-3.87%)

  • Cash: $4,500 (+0.00%)
  • Savings: $7,500 (-80.00%)
  • Registered/Retirement Investment Account: $63,300 (+15.93%)
  • Pension: $22,350 (+0.00%)
  • Non-Registered Investment Account: $15,000.00 (+3.45%)
  • Smith Manoeuvre Investment Account: $45,000 (+9.76%)
  • Investment Property: $ 124,500 (+0.00%)
  • Principal Residence: $275,000 (+0.00%) (purchase price)
  • Vehicles: $9,000 (2 vehicles) (-10.00%)

Liabilities: $93,200.00 (-27.53%)

  • Tax Liability: $3,000 (-0.00%)
  • Investment Property Mortgage: $92,000 (-0.11%)
  • Principal Residence Mortgage (readvanceable): $38,000 (-48.30%)
  • HELOC balance: $52,200 (+0.19%)

Total Net Worth: ~$348,450.00 (+$17,600) (+5.32%)

  • Started 2008 with Net Worth: $309,950.00
  • Year to Date Gain/Loss: +12.42%

May has turned out to be another record breaking month for 2009 and has pushed the net worth gain for the year (thus far) into the double digits.

Some quick notes and explanations to net worth questions I get often:

The Cash

The $4,500 cash are held in chequing accounts to meet the minimum balance so that we pay no fees (accounting for regular bill payments). Yes, we do hold no fee accounts also, but I find value in having an account with a full service bank as the relationship with a banker can prove useful.


Our savings accounts are all held with PC Financial. We hold a fair bit of cash in case “something” comes up. The “something” can be anything that requires cash such as an investment opportunity that requires quick cash or maybe an emergency car/home repair.  We also need cash to cover any future tax liabilities.

Real Estate

Our real estate holdings consist of a primary residence plus a rental property. The value of the principal residence remains valued at the purchase price despite significant appreciation in the real estate market that we’re in.


  1. paul s on May 28, 2009 at 8:05 am

    Interesting change in strategy, I assume caused by the uncertainty of the times.
    Personally I don’t get why you don’t just pay your mortgage off with some of your unregistered investments.


  2. Kathryn on May 28, 2009 at 8:45 am

    That’s a pretty impressive gain for the month. Congratulations!

  3. Jordan on May 28, 2009 at 9:22 am

    FT did I hear you right on the Questrade panel that you’d have to achieve an annual 22% rate of return for 5 years to meet your $1M goal? Do you believe that’s possible? If not how will you change your goal, lower the $ target or extend the timeline? Maybe Tim’s got it right with “Free at 45” ;-)

  4. Kirk S. on May 28, 2009 at 9:26 am

    Congratulations and smart ideas (paying down your mortgage and opening up more room in your HELOC). The nice thing about paying a mortgage is that its a guaranteed investment….

  5. Dividend Growth Investor on May 28, 2009 at 9:41 am

    A 5% gain is nothing to sniff at. It seems it’s actually almost half of your year to date gains.
    I am looking at the charts and it seems to me that if Dow Jones falls below 8170 we could see lower prices.. Of course the real thing is that it shouldn’t really matter in 20-30 years whether you bought stocks when Dow was at 8300 or at 7000.. Just find a company that raises dividends every year, re-invest them and enjoy the cashflow later..

  6. DavidV on May 28, 2009 at 10:06 am

    This will sound silly, but as a non excel wizard I’ll ask. Since January I’ve been tracking my net worth and have it set up similar to yours. However, while I can get all the numbers in say “asset” to add up, I haven’t figured out how I can see the increase or decrease of each portion.

    I’m sure there is an easy way but any help would be great!

  7. Sampson on May 28, 2009 at 10:12 am

    Great job FT!!! Such a high % gain at such a level of $ assets is great. Keep up the 5% monthly rate of increase and you’ll have an annual increase of 71% ;-)

  8. Darcie on May 28, 2009 at 10:13 am

    We are being aggressive about our mortgage as well. It is amazing how much difference even small extra payments make. Making sacrifices to make the debt disappear has been less than glamourous, but will be SO worth it. It’s also about the interest charges. In the beginning the interest was over 8000.0 per year, this year it will be less than 600.0. Thanks partly to the lower rates, we should be able to pay this 25 year mortgage off in less that 10 years. Let me tell you, we will be having an awesome party. Our friend and family deserve to know a mortgage doesn’t have to be a life-long comittment!

  9. Four Pillars on May 28, 2009 at 11:09 am

    Jordan – I can’t remember the exact wording FT used on the panel but keep in mind that he’s not talking about portfolio performance (ie rate of return) – but rather gross increases in net worth which will include contributions as well.

    Even including contributions, 22% will be very difficult if you consider that when the net worth gets larger – the contributions become less significant.

  10. Jason on May 28, 2009 at 11:46 am

    Is it fair to include the entire value of your RRSP and pension accounts in your net worth? These are pre-tax accounts whereas everything else is post-tax. Of course, it would be almost impossible to predict how much tax you will pay when you eventually withdraw these funds, so I don’t see a solution for accurately calculating your net worth.

  11. Highlander on May 28, 2009 at 12:21 pm

    My current HELOC is at prime. My mortgage is variable at prime-0.5%. I was recently informed that any further advances of the HELOC would bump the interest rate to prime+1% since all new LOC’s are at that rate. My banker said we could open a new LOC in order to leave the existing one at prime however (phew).

    The net effect now is that the after-tax rate on any new LOC withdrawals is within a hair of the mortgage rate.. which means the tax advantage of my SM is now gone (in fact, it’s negative by .005%) from this point forward until interest rates start to move again.

    Anyone else in this boat? Is it changing your strategy at all?

  12. LuLu on May 28, 2009 at 12:35 pm

    My HELOC is at prime. I talked to TD last week, and was told that they offer P+0.5 (of the entire balance) for advances of HELOC for existing HELOC clients.

  13. Rebecca on May 28, 2009 at 2:07 pm

    FT, How did you calculate the pension amount and what is the estimated market price for your principle residence? I think we are in the same age range, but my asset is no where near the amount. Good for you!

  14. Father of Five on May 28, 2009 at 3:23 pm

    When I review my net worth, I also consider net worth without the value of my house or car, since I am unlikely to ever sell these assets. It is all the other assets that will eventually fund my financial freedom. Plus determining the values of the house and car is imprecise, since only an actual sale can determine the true value.

    I also attempt to calculate the tax on my registered investments – since I have a sense of my retirement income needs, and thus the general marginal tax rate that should apply to the eventual withdrawal of registered investments. I include RESPs in this calculation also.

    Why do you include the house if not planning to sell? And if possibly you would be selling, why not account for the increase in its fair market value in the meantime? You could always be conservative in your estimate of growth, but I would suggest 8-10% annual increases would not be unreasonable in St. John’s over the last few years.

  15. FrugalTrader on May 28, 2009 at 3:47 pm

    paul, my non-reg investments are currently underwater so I’m waiting for them to recoup a little before selling.

    Jordan, as FP pointed out it is net worth gain and not portfolio gain. I will admit that it will be challenging, but I’m still going for it.

    David, we simply divide the current month value by the previous month then subtract one.

    Darcie, congrats on your achievements!

    Rebecca, I simply use the last pension statement value, then add any contributions going forward. I would say our home is worth in the mid low 300’s.

    Father of Five, I simply use the calculation: networth = assets – liabilities. A principal residence is an asset (imo)

  16. Canadian Dream on May 28, 2009 at 4:08 pm

    @ Jordan, FT

    Actually I believe there is no ‘right’ way to do this. FT and my goals are just that goals. We aren’t going to die or anything if we don’t make them. We try our best and if we beat them great, if not, well at least we tired.

    FYI if anything right now I’m drifting downwards from my target date. I might hit FI around 43 based on the most recent calculations, but wait a few months I image that number will keep shifting between my range of 40 to 50 years old.


  17. James on May 28, 2009 at 4:39 pm

    FT, wouldn’t it be more fair to consider only the value of your home minus the value of shelter as an asset. That is, the asset value would be the current value – the present value of all rents due (assuming you knew how long your were to live) or the current value derated based on a reverse mortgage.

    The latter would probably be a higher number given your age, but the reality is, if you consider your home an asset, then you should consider your need for shelter a liability.

    This is not the same for vehicles as you could technically liquidate them and not need replacement, however, I don’t include vehicles in my assets. I have many other items worth several $k, that I don’t count, so why would vehicles count.

  18. FrugalTrader on May 28, 2009 at 7:49 pm

    James, the liability of owning a home is taken care of in the mortgage interest payments taken out of cash flow. If the need for shelter is a liability, then would renters consider rent to be a liability? No because it’s simply taken out of cash flow.

  19. Mockingbird on May 28, 2009 at 8:00 pm

    Congrats on another great month, FT.

    Four Pillars: Good point regarding contribution amount compared to ROI. Even at maximum $20k in RRSP contribution room, that only accounts for about 6% yearly or 0.5% monthly towards FT’s net worth. Pretty impressive.

    James: Theoretically, you can put values to every single item you own and put them towards your net worth since the definition of “asset” means – any item of economic value that could be converted to cash. But is it worth your time? By not calculating, you are also taking much more conservative approach. As long as you are consistent with your reporting, then it doesn’t matter. FT has been consistent throughout. Definitions of terms – assets, liabilities, and net worth – are pretty clear throughout any business and economic texts. I do not know why people try to redefine them and make them complicated than what they are. The cost of shelter is an expense, but if you borrow money to provide that shelter, then that money (mortgage) becomes liability. The vehicles are normally considered depreciating assets (unless collector’s and/or vintage cars), but nevertheless assets. You will more likely see people include them in their worth statements if there are liabilities (loans) on them and/or if they still have decent residual value.

  20. cannon_fodder on May 28, 2009 at 8:01 pm


    Rents would be considered an expense – neither a liability nor an asset. If FT’s (evil?) twin brother sold his house and moved back in with his parents would he still not have the same amount of money in the bank from the house sale vs. if he decided to rent an apartment?

    When you apply for a credit card, do you list your house as an asset at its current value or do you subtract future interest payments on your mortgage or rents?

    I think of it this way – if for some reason I had to get rid of every tangible, wortwhile thing I own, how much would I get for it minus what debts I’d have to clear off. That becomes my net worth. Some people don’t factor in furniture (perhaps unless they have a lot of expensive furniture), some people don’t factor in cars, some people don’t factor in that valuable coin collection passed down by Uncle Herbert.

    But, for most people, a house is an asset plain and simple and a mortgage is a liability plain and simple. (A house that is a money pit might also be a liability, if you know what I mean!)

    Whether net worth really means anything to you is a personal choice. It is a metric and some people use it to show that they are making progress towards certain financial goals. I don’t know that it has much impact outside of your homestead other than when applying for credit.

  21. Canadian Finance on May 28, 2009 at 9:02 pm

    FT, congrats on another good month! Glad to hear you’re hoping for another dip in the market so that you can use your HELOC room, the extra you make off the dividends after interest could go a long way in paying down the mortgage.

  22. Chris L on May 28, 2009 at 11:08 pm

    Finally! I think I mentioned this a long, long time ago. I’ve already paid off my mortgage where I live. Now I’m paying a mortgage off on a rental property. People think it’s nuts. I really don’t understand why. When they’re paid off, I’m retired. Who cares if I have to pay more taxes by getting rid of a write-off in terms of interest, I make more money to pay it with! I guess too many people hold too much debt to do what I do. Pay off your investment properties people, you make more money to pay taxes with! Pay off your house mortgage, then you’ve got an extra grand to invest with! I don’t care how low the interest rate is, the quicker it’s gone, the quicker you can spend the rest! Imagine the safety you have when you don’t have to worry about your house! You can CHOOSE to work or not. It doesn’t take much work to pay for food you know. Plus you don’t need a car anymore, since you don’t have to get to work. 33% less work, due to 1/3 less expense. Nearly, anyway.

  23. TStrump on May 29, 2009 at 2:33 am

    Wow – you’re doing really well!
    Someday, I might start posting my net worth, but honestly, I’m a little embarassed and will have to wait until I save a bit more.

  24. archanfel on May 29, 2009 at 9:32 am

    Not sure why you are eager to pay off your mortgage. The only advantage real estate investment have over stock market is massive leverage. Although it could be a double edge sword, in the long term, it would boost return significantly. Historically, house price increases little ahead inflation (some people can get 200% return, but other people can win the lotto). However, the high leverage makes the return much more attractive.

    Also, how do you manage to dump $10,000 into your investment+mortgage month after month? (It was $10,500 this month and $9,000 last month IIRC) Even if you save 50% of your income, that would make your before tax income to be well over $300,000. I am under the impression that you don’t make that much.

  25. Finance_Addict on May 29, 2009 at 3:14 pm

    archanfel…It must be ad income from this blog. Getting alternate sources of income must make the million dollar journey easier. Not that doing this blog is easy to do, but I’m sure the free cash flow it generates does a great job in either paying for living expenses or putting down the mortgage or investing. I’m sure the blog income probably started out small but has likely grown to a significant amount….well done. However I wonder how long the million dollar journey would take if someone just had 1 or 2 regular pay stubs to work with and no alternate sources? I suppose that is the real journey, finding ways to create alternate income, whether it’s through a blog ad revenue or renting properties or dividend income…etc. With dicipline anyone can be frugal with spending but to become a millionaire by your mid 30’s without any parental help could probably come from multiple income streams, growing your own business, being lucky enough to work for a place like google etc.

  26. FrugalTrader on May 29, 2009 at 3:29 pm

    Arch, how did you come up with $10,500 this month?

  27. Sampson on May 29, 2009 at 3:50 pm

    From what I remember, FT had over $35k in savings 2 months ago, so I only assume that the mortgage payment and investments came from there.

  28. John on May 30, 2009 at 1:21 am

    Who cares what your home is worth. Are you going to sell it right now? The bank is giving money away. Buy rental property in Western Canada. Choose to work.

  29. archanfel on May 30, 2009 at 3:46 am


    Last month, your savings went from $37,500 to $7,500, a loss of $30,000. In the mean time, your mortgage went from $73,500 to $38,000, a decrease of $35,500. Therefore, the net deposit was $5,500. Add the $5,000 you put into your RRSP, the total was $10,500.

  30. MoneyEnergy on May 30, 2009 at 5:26 am

    Wow, great job on the networth… I can’t wait to get to that point myself! Right now I just focus on cashflow and trying to increase my passive income. Then at some point I’ll finally sit down and learn this Smith Manoeuvre and hopefully be able to purchase a house at that point, too. Looking about four years out, though.

  31. moneygardener on May 30, 2009 at 6:17 pm

    great progress, always enjoy your net worth posts!

  32. FrugalTrader on May 31, 2009 at 10:35 am

    Archanfel, wow, never really analyzed the numbers like that before, thanks. :) A lot of that gain was probably due to a tax return that my wife received, increase in professional employment income (both of us), along with blog income. As well, the mortgage reduction includes regular payments which we have increased. With the the crazy low rates that we are paying (prime – 0.85%), most of the mortgage payment is going towards principal. And no, we don’t make $300k household income. :)

  33. Martin on May 31, 2009 at 5:41 pm

    FT, wow, you’re lucky to be this rich. Well done.

  34. DAvid on May 31, 2009 at 11:18 pm

    I don’t think it is luck that places the FrugalTrader family in their current financial position. FT, in my understanding, comes from a family that values education, and I expect his wife has a similar family background. They both have completed university and earn professional salaries. They have been cautious about their expenditures, and fastidious in their savings & investments.

    If you read “The Wealthy Barber” or “Findependence Day” or watch “‘Til Debt do us Part”, you will learn the same basics they have applied.


  35. moneygardener on June 4, 2009 at 10:53 pm

    luck has nothing to do with it

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