Net Worth Update August 2015 – Sean Cooper (+6.3%)

Welcome to the Million Dollar Journey August 2015 Net Worth Update – Team MDJ edition. A select group of readers were selected to be part of Team MDJ which was conceived after the million dollar net worth milestone was achieved in June 2014. Sean Cooper was selected as a team member and will post net worth updates on a regular basis. Here is more about Sean.

Profile:

• Name: Sean Cooper
• Age: 30
• Net Worth: $652,949
• Day Job: Employed with a major global pension consulting firm.
• Family Income: $50,000 (full-time job), $18,600 (rental income before expenses), $40,000 (approximate freelance income), $5,000 (part-time job)
• Goals: Mortgage paid off by 31, million dollar net worth by mid thirties.
• Notes: Owns a house, rents out main floor. Most of net worth is in the principal residence. No other debt besides mortgage.

I’ve been working very hard in the last quarter and the hard work looks to have paid off. In two short months I’ll have accomplished my ultimate goal of reaching mortgage freedom. August 1st is my mortgage anniversary date, so I made the maximum lump sum payment of $38,250 to bring my mortgage balance down to just under $6K (this money was mostly from my successful freelance writing business).

At the end of September my mortgage will be paid off (five months before I reach age 31, no less). Words can’t express how happy I am. Paying off my mortgage will feel like the weight of the world has been lifted off my shoulders. To celebrate this milestone, I’m planning to have a huge mortgage burning party. Does anyone have any suggestions for throwing the best mortgage burning party ever?

Over the last few months, a good friend of mine has helped me realize there’s more to life than saving. She’s inspired me to step outside my comfort zone and try out new things. For example, I recently enrolled in the Improv Program at the Second City. Although the courses are a bit pricey, they’re worth every penny. Not only have I made a ton of new friends, it has helped me come out of my shell. Friends and coworkers have mentioned how much friendlier and sociable I am. Me a year ago and me today are like night and day. If you’re a shy, quiet person looking to become more outgoing, I highly recommend these courses.

Although I’m still frugal with my spending, I’ve helped realized there are certain aspects of your life when it’s ok to splurge. For example, I recently purchased a cellphone. Being frugal I used a basic cellphone that I had from six years ago. I figure I don’t really need a smartphone since I spend enough time on the computer as it is (I don’t need to get addicted to my phone).

Instead of a monthly plan, I chose to go with pay as you go. For $100 with Fido, I get 100 minutes and unlimited texting for a year – not bad! While I don’t talk often, I mainly use my cellphone for texting. A $100 voucher works out to less than $10 a month – I’d be foolish not to own a cellphone!

With my mortgage paid off, I’ll have the financial freedom to pursue other goals in life. Since I’ve been so focused on paying down my mortgage, I haven’t been able to travel as much as I’d like to. I plan to change that soon. Since I’m a big fan of cycling, I’d like to visit Vancouver. I’ve heard the view of the mountains is breathtaking. Other places I’d like to visit include New York City, Chicago and Europe.

A couple months ago, I started going to the gym. This was my first time going to a gym, so I wasn’t sure what to expect. I’m happy to say my experience has been a positive one. I enrolled at a local neighbourhood gym in Toronto called Resistance Fitness. The staff is friendly, the machines are in good working order and the membership is reasonably priced. If you’ve never joined a gym before, I’d highly recommend it. I’ve been taking a couple supplement products and seen immediate results. I’ve recently started taking Serious Mass and Kre-Alkalyn. Not only do I feel better (both physically and mentally), I’ve gained 16 pounds in muscle in under two months. Are there any products you can recommend that you’ve seen great results with?

This year I’ve been really focusing on my social life. With my mortgage soon to be paid off, I’ll have more time to hang out with friends and hopefully meet that special someone. I’ve been out of a few dates the last few months, but so far no luck. A word of advice: when you’re meeting someone for the first time, it’s a good idea to go out for coffee. Save the expensive dinner for the second or third date once you get to know the person a bit better. My friends have been nice enough to offer to give me a makeover. I’ve started with growing a beard to look a bit older, next is to invest in a new wardrobe.

On to the net worth numbers:

Assets: $658,278 (-1.49%)

• Cash: $4,145 (-89.77%)
• Registered/Retirement Investment Accounts (RRSP): $68,526 (+29.47%)
• Tax Free Savings Accounts (TFSA): $0 (+0.00%)
• Defined Benefit Pension: $35,266 (+44.41%) (commuted value adjusted annually in June when I receive my annual statement)
• Non-Registered Investment Accounts: $341 (-1.00%)
• Principal Residence: $550,000 (+0.00%) (purchase price adjusted for average selling price annually)

Liabilities: $5,329 (-90.13%)

• Principal Residence Mortgage: $5,329 (-90.13%)

Total Net Worth: ~$652,949 (+6.30%)

• Started 2015 with Net Worth: $585,926
• Year to Date Gain/Loss: +11.44%

Some quick notes and explanations to common questions:

The Cash

The cash is held in a no fee chequing account with PC Financial. I use my chequing account for regular bill payments, as well as making lump sum payments on my mortgage.

Savings

My savings are held in a Tax Free Savings Account (TFSA) with Canadian Direct Financial. I mainly use my TFSA as an emergency fund and to save towards the balance owing when I file my personal income tax return at the end of April. Even though I contribute the maximum to my RRSP annually, I still have a large balance owing to the taxman since I receive rental income and income from self-employment (I’m a freelance writer).

You may be wondering why my balance is currently $0. At the beginning of the year I had $15,000 in my TFSA. However, this year was especially costly, as I had to spend $25,000 on repairs and renovations to my house, including a new retaining wall, side walk, front porch, sump pump, and eaves troughs. I plan to rebuild my emergency fund once I’ve maximized the prepayment privileges on my mortgage. If any more costly home repairs creep up, I can always slow down on prepaying my mortgage.

Where Do the Savings Come From?

I’m very frugal with my money. People are often amazed at how low my monthly expenses are. For most families the most costly household expenses are housing (mortgage or rent), transportation, and food. I’ve been able to minimize all three through lifestyle choices.

As a single first-time home buyer in Toronto, I decided to take on the added responsibility of being a landlord. Instead of living upstairs, I decided to live in the basement and rent the upstairs to a family. I got this brilliant idea from the host of HGTV’s Income Property, Scott McGillivray, who lived in his basement for nine years while renting out the upstairs unit to save money.

Instead of driving a car, I cycle the majority of the year and take public transit during wintertime. In my recent article in the Financial Post readers were amazed I only spend $100 per month on groceries. How have I managed to spend so little? I shop at discount supermarkets, price match, avoid fast food, and buy sale items in bulk. I’m also vegetarian, which helps me avoid paying the outrageous prices for meat.

How Have I Been Able to Pay Down My Mortgage So Quickly?

Despite an annual salary of only $50,000, I’ve been able to pay down over half of my mortgage in only two years through hard work and determination. Besides being a landlord, I’m a financial journalist. I also work part-time at a grocery store once a week. Through secondary sources of income, I’ve been able to maximize the prepayment privileges on my mortgage and maximize my RRSP contributions each year.

Update May 2015 – I’ve revised my freelance income up to $40,000 from $20,000 to better reflect how much I earn. I’ve received a few questions about how I’ve been able to pay down my mortgage so quickly. It’s mainly been through my freelance income. I tend to be conservative with my estimate of freelance income, as it can vary a lot from month to month. For example, some months I earn $2,000, while others I earn $5,000+. For 2014, I ended up earning over $60,000 in freelance income. Earnings that much in freelance income requires working 80 hours or more a week (including my full-time job). I don’t plan to keep this insane workload up forever. Once my mortgage is paid off at the end of 2015, I plan to scale back and only focus on the freelance work that I enjoy.

Real Estate

My real estate holdings consist of my primary residence. I purchased my house in August 2012 for $425,000 with a mortgage of $255,000. As I live in Toronto, one of Canada’s most expensive housing markets, I’ve based the value of my principal residence on comparable properties that have recently sold in my neighbourhood.

Pension

The pension amount listed above is the value of my defined benefit pension plan. I take the commuted value from my annual statement, which I receive by June 30th each year. I am fortunate to receive the commuted value on my annual statement, as most employers don’t provide it. This makes retirement planning a lot easier.