Welcome to the Million Dollar Journey February 2016 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. Nobleea – the Oil and Gas Engineer, was selected as a team member and will post net worth updates on a quarterly basis. Here is more about Nobleea.
- Name: nobleea
- Age: 37
- Net Worth: $811,433
- Day Job: Engineering manager at oilfield services company, Teacher (wife)
- Family Income: $130,000 (main job), $10,000 (part time job), $70,000 (wife main job), $10,000 (wife part time job)
- Goals: Million dollar family net worth before 40, Retirement from primary job at 50 (for me)
- Notes: Owns primary house. Building new home across the street.
We live in Edmonton where incomes are decent and housing prices are fairly reasonable. Some may roll their eyes at the high family income and say that a million dollar journey is going to be pretty easy. I have a plan to retire at 50 and pursue other interests. My wife will likely continue working until it makes sense to retire with her DB pension as the penalties for early retirement are pretty severe. We are in the process of building our new family home on a tear down lot across the street from our current home with an expected occupancy date some time in Sept 2016.
We completed about 70% of our financial goals that we had for 2015 including: opening and funding TFSA’s; signing up for term life insurance; buying back pension maternity leave service; and, paying off the remaining car loan. Our goals for 2016 are varied, but our financial ones include: contributing 30K to our TFSA; moving in to our new house and selling our old one for $475K or more; tracking utility consumption on the current and new house; and, tracking and reducing our monthly spend in a variety of categories. The end goal is to have a reasonable budget by the middle of the year. The TFSA is invested in a mix of 85% couch potato ETF’s and the remaining blue chip stocks.
Since our update last quarter, our house construction has progressed with the house locked up and all rough ins done. They are putting the siding on now and it is looking like we’ll be able to take possession in late June or early July. Our current house was refinanced with an open mortgage to free up equity to pay for the new place. We chose an open mortgage so that we can pay it off without penalty this summer. The first draw was completed on the construction draw mortgage. We are allowed a total of 4, with the final one upon completion. The second draw will take place later this month.
The drop in oil prices has certainly been noticeable in Edmonton housing and especially condo prices. We have had to lay people off at work and are also on furlough which gives us an unpaid day off every 2 weeks. I have no concerns about my job at this time, however, if oil continues to stay under $30 for the rest of the year, I would probably be a little more concerned at this time next year. The spending tracking and budget process we’ve started has shown that we could survive in our new home with my wife’s salary and the garage suite rented out, so we sleep just fine at night.
The primary increase in our net worth numbers comes from my wife’s DB pension value. It is updated whenever I get a statement from it to reflect the amount listed for Termination Benefit. This is the amount that would get paid out if she left tomorrow. Our daughter’s RESP is healthy and has a balance of about $9,200 though the value is not included below. It is invested in TD e-series. She turns 2 next month.
On to the net worth numbers (Quarter/Quarter):
Assets: $1,523,539 (+30.3%)
- Cash: $76,515 (+2500%)
- Registered/Retirement Investment Accounts (RRSP): $147,597 (-3.5%)
- Tax Free Savings Accounts (TFSA): $8,902 (+125%)
- Defined Benefit Pension: $140,334 (+48.4%)
- Principal Residence: $458,000 (+0.00%)
- New Build Property: $640,259 (+66%)
- Vehicles/Other: $51,932 (-7.3%)
Liabilities: $712,106 (+81%)
- Construction Mortgage: $322,260
- Mortgage: $383,405
- Credit Cards: $6,441
Total Net Worth: $811,433 (+4.53%)
- Started 2015 with Net Worth: $717,634
- Year to Date Gain/Loss: +13.1%
Some quick notes and explanations to common questions:
Cash includes bank account balances in two accounts, plus any gift card balances. Cash balances may be high right now to cover the monthly bills from our builder. When not building a house, we use cash flow modeling to predict the maximum amount we can put towards debt/investments today without having a negative balance in the future, taking all one time or non-regular bills in to account.
Loans and Credit Cards
The credit cards are paid off in full every month with no interest due. We put all our expenses on credit cards for points and cash back. As this can be a substantial amount some months, I believe it needs to have a line item in your monthly net worth as it is a liability at that snapshot in time.
TFSA’s have just started and we hope to have them maxed out within a year or two. This will be our early retirement fund, or emergency savings if it comes to that.
Our primary residence was purchased in 2008 for $355K. We have put in $110K in DIY renovations since then in a complete overhaul. The house value shown here is based on those two numbers and is conservative relative to what similar homes in the area sell for. As part of our financing for the new house, our home was appraised by the bank at $480K which lines up well with the estimate above.
Our ‘tear down’ is across the street and was purchased in 2014 for the lot, purchase price $375K. The next year will be a mess with construction draw mortgages, HELOC balances for some construction costs, messy accounting for a rental that was effectively disposed of after 7 months of rent. The value of the property includes lot purchase price plus any monies paid to the builder this far.
My wife has a DB pension as a teacher. The balance shown is the termination benefit should she quit from her position tomorrow, net of any taxes. I have a matching RRSP plan through my work. Combined with CPP, we are not worried about retirement income, it’s just a matter of timing. We plan on contributing to my RRSP in order to get the full match but no more, then max out TFSA for investments, and then non-registered investments.
We have pretty substantial unused RRSP contribution room and will likely never use it. Perhaps in the event of a large capital gain, we may contribute some to offset the capital gain taxes.
Just over half of this amount is vehicles. We have a two 2013 model year vehicles, one purchased new, one purchased used. I depreciate their value every month in net worth updates to keep it at just above wholesale value. The two vehicles combined cost us $250/mo in depreciation and repairs. I find that reasonable considering it would be hard to lease a single small vehicle for that price. The “Other” refers to fairly extensive photography equipment (part time business), sporting equipment and personal property.