Welcome to the Million Dollar Journey December 2012 Net Worth Update – The Year End Summary. For those of you new to Million Dollar Journey, a monthly net worth update is typically posted near the end of the month (or beginning of the next) to track the progress of my journey to one million in net worth, hopefully by the time I’m 35 years old (end of 2014). If you would like to follow my journey, you can get my updates sent directly to your email or you can sign up for the Money Tips Newsletter..
Before I start on the update, I’d like to tie up some loose ends with regards to the 6 year anniversary giveaway. As promised, the first 20 eligible comments will automatically receive a e-copy of A Beginners Guide to Saving and Investing, with another 30 copies given away randomly. I will be emailing the winners within the next couple of days.
In addition to the books, I committed to donating $1 for every incremental facebook “like” to Make a Wish foundation which resulted in a $100 donation made yesterday. Finally, what you’ve all been waiting for, the winners of the grand prize ($500 value) where 6 lucky readers will receive a subscription to the highest rated investment newsletters in Canada – The Successful Investor (among others). Big congratulations to the following winners:
- @My Own Advisor
- Jason S
- karen (comment 181)
Now that we have that business out of the way, lets move onto the final net worth update for the year. There’s no better way to start than to talk a little bit about the market. It appears that the Canadian and US markets are diverging a little bit with the TSX taking charge. The TSX gained 1.07% (via XIU.TO) for the month with the SP500 losing about 1.02% (via XSP.TO), both including dividends. For 2012, the TSX returned about 5.4% and the SP500 about 12% (both including dividends) which is a relatively strong year overall.
Despite the negative month for the SP500, my RRSP, which has large US exposure is fortunately still up for the month. The biggest surprise was with my leveraged dividend portfolio. The Canadian dividend stocks within that portfolio returned a little over 3% beating the TSX by over 2% for the month. I made a couple of purchases this month, but I believe that the gains are due to one of my larger positions making 52 week highs. Overall, the dividend portfolio grew about 11.5% in 2012 which handily beat the TSX (including dividends).
If you take a look at the numbers below, our overall net worth for 2012 grew by about 18% ending the year with about $690k. With positive market action this year, a portion of these gains came with portfolio growth, however, most of the gain is due to increased income which has lead to increased savings. As mentioned in previous updates, I funnel extra cash flow into my non-registered account which is reflected below.
Going back to December 2011’s net worth update, I wrote:
This year was also exceptionally busy! With my full time work picking up, having our second child, working on new web projects while running Million Dollar Journey and Canadian Money Forum, I was stretched pretty thin this year. Oftentimes writing articles during the week until after midnight (like this post). I’m hoping that 2012 brings some sanity back to my schedule.
While 2011 was busy, 2012 was likely just as busy or busier. While still running and growing my sites, the consulting side of the business really picked up this year, which has driven higher income. We maintain a relatively low key lifestyle (we may occasionally splurge on some travel), while carrying no bad debt, so incremental income is likely saved or invested (how we save money).
With the goal to reach $1 million in net worth by the age of 35 means I have until the end of 2014 (about 2 years). With $690k on the books is it possible to gain over $300k in 24 months? At this point, I’ll need a little over 20% in net worth gains in each of the next two years – the pressure is on! While it is possible, I would need to be extremely aggressive and likely work even more than I do now (not ideal). In the New Year, there will likely be some additions to the net worth update as we have assets that are not yet accounted for which should help take some of the pressure off. Stayed tuned for the January 2013 update to find out more.
For those of you who track your net worth how did you do in 2012?
On a finishing note – Here’s to a Happy, Healthy and Prosperous New Year!
On to the numbers:
Assets: $784,800 (+1.58%)
- Cash: $4,500 (+0.00%)
- Savings: $20,000 (+0.00%)
- Registered/Retirement Investment Accounts (RRSP): $134,000(+1.36%)
- Tax Free Savings Accounts (TFSA): $40,800 (-0.24%)
- Defined Benefit Pension: $41,000 (+0.74%)
- Non-Registered Investment Accounts: $136,000 (+5.43%)
- Smith Manoeuvre Investment Account: $108,000 (+3.05%)
- Principal Residence: $300,500 (+0.00%) (purchase price adjusted for inflation annually)
Liabilities: $94,100 (+0.21%)
- Principal Residence Mortgage (readvanceable): $0 (0.00%) (Paid off in 2010!)
- Investment LOC balance: $94,100 (+0.21%)
Total Net Worth: ~$690,400 (+1.75%)
- Started 2012 with Net Worth: $585,228
- Year to Date Gain/Loss: +17.97%
In my last update, readers suggested to chart my net worth progress over time. Below are the net worth values since Dec 2006 with data points taken semi annually.
- December 2006: $198,500
- June 2007: $254,695
- December 2007: $279,300
- June 2008: $310,483
- December 2008: $309,950 (rough second half)
- June 2009: $355,850
- December 2009: $399,600
- June 2010: $456,910
- December 2010: $505,800
- June 2011: $558,713
- December 2011: $585,228
- June 2012: $631,400
- December 2012: $690,400
Some quick notes and explanations to net worth questions I get often:
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 – ie. our credit card bill). 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 has proven useful.
Our savings accounts are held with PC Financial and ING Direct. We usually 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.
Where Does the Savings Come From?
We don’t live a lavish lifestyle (how we save money) and do not carry any bad debt. The only debt we have is an investment loan (which pays for itself), so we end up pocketing a majority of our earnings. Our earnings come from salaries, private business income (via dividends to shareholders), and eligible dividends from publicly traded companies.
Our real estate holdings consist of a primary residence and REITs plus a rental property. The value of the principal residence remains valued at the purchase price (+inflation) despite significant appreciation in the local real estate market.
The pension amount listed above is the value of both of our defined benefit pension plans. I basically take the semi annual statement and add the contribution amounts (not including employer matching) on a monthly basis. The commuted value of the pensions are not included in the statements as they are difficult to estimate.
Stock Broker Accounts
Another common question is which discount broker do I use? We actually have accounts with multiple institutions. I’m hoping to reduce the number of accounts that we hold in the near future. Here is a review of some of the more popular online stock brokers.