Welcome to the Million Dollar Journey February 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.
- Name: Sean Cooper
- Age: 29
- Net Worth: $585,926
- Day Job: Employed with a major global pension consulting firm.
- Family Income: $50,000 (full-time job), $18,600 (rental income before expenses), $20,000 (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.
2015 looks to be a big year for me. I’ve set several ambitious goals for 2015. Not only do I turn 30 at the end of February, I plan to be mortgage-free by the end of November. I’m considering my investment options to better diversify, since most of my net worth is tied up in my house.
2015 has started off pretty busy at work. January is always a crazy month because pension adjustments and pension adjustment reversals are due by month end. I’ve also taken on a heavier workload with the hope of being promoted. I’ve gone from preparing pension packages to checking and reviewing packages from junior employees. August 2015 will mark my five year anniversary at my company. It’s my goal to be promoted to a senior pension analyst before the end of the fiscal year (June 30th) and I’m well on my way. This should provide a nice boost in salary and the opportunity to advance further in my career.
With mortgage freedom on the horizon, I’m starting to look at my investment options once my mortgage is paid off. When I’m mortgage-free, the first thing I’ll do is max out my TFSA. I’m debating on what to invest my money in. Currently, my RRSPs are invested in the TD e-Series Funds (30% Canadian equities, 30% U.S. equities, 30% International equities, and 10% Canadian bonds). I’m not much for trading stocks; I prefer turn-key investments that provide a solid long-term return. I’m debating between the TD e-Series Funds and Tangerine Investment Funds. Readers, do you have any other suggestions?
My new tenants have been wonderful so far. I couldn’t ask for better tenants. They’ve been courteous, considerate and always pay their rent on time. They even offered to paint my upstairs and did a fantastic job. After my old tenants moved, I decided to change the rent from inclusive to plus utilities. I did this because my old tenants didn’t respect my utility bill. Fzor example, they left a heater on for two straight months, causing my hydro bill to skyrocket. Furthermore, utility rates tend to increase well above the rate of inflation, yet I’m only allowed to increase the rent one or two percent a year. This arrangement has worked out great so far. Although it’s a pain to photocopy utility bills, it’s well worth the effort; my tenants have paid the utilities on time every time.
After last quarter, my investment portfolio has recovered nicely. My RRSP account is up 8.36 percent (without making any further contributions). You may be wondering why I have a lot of money sitting in cash right now. With all the freelance income I earned this year, I expect a hefty tax bill. Also, I plan to start contributing to my RRSP in March, maximizing my contributions for the year before August 1st, my mortgage anniversary date, when I can start making lump sum payments on my mortgage once again.
On to the net worth numbers:
Assets: $649,394 (+4.17%)
- Cash: $25,259 (+714.35%)
- Registered/Retirement Investment Accounts (RRSP): $49,377 (+8.36%)
- Tax Free Savings Accounts (TFSA): $0 (+0.00%)
- Defined Benefit Pension: $24,421 (+0.00%) (commuted value adjusted annually in June when I receive my annual statement)
- Non-Registered Investment Accounts: $337 (+4.05%)
- Principal Residence: $550,000 (+0.00%) (purchase price adjusted for average selling price annually)
Liabilities: $63,468 (-15.52%)
- Principal Residence Mortgage: $63,468 (-15.52%)
Total Net Worth: ~$585,926 (+6.7%)
- Started 2014 with Net Worth: $460,500
- Year to Date Gain/Loss: +27.24%
Some quick notes and explanations to common questions:
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.
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 February 2015 – 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.
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.
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.