Net Worth Update July 2010 (+1.49%)
Welcome to the Million Dollar Journey July 2010 Net Worth Update
Very little has changed since the June update. In fact, the updates look very similar with the biggest increase this month again being … savings! While building and generating cash is the goal, it can become an issue if you don’t know what to do with it. With excess cash, my first choice is to pay down debt, but in my case, my only debt remaining has extremely low interest, or is tax deductible. The next option is to invest it, which is where I see most of the cash balance going. For 2010, I haven’t made any RRSP contributions yet, so I’ll be sure to get on that soon.
For those of you who have strong cash flow, what are your priorities for cash allocation?
On to the numbers:
Assets: $ 531,900 (+1.00%)
- Cash: $4,500 (+0.00%)
- Savings: $50,000.00 (8.93%)
- Registered/Retirement Investment Accounts (RRSP): $76,500.00 (+0.26%)
- Tax Free Savings Accounts (TFSA): $19,900 (-0.47%)
- Defined Benefit Pension: $30,450.00 (+1.67%)
- Non-Registered Investment Accounts: $12,300.00 (+0.69%)
- Smith Manoeuvre Investment Account: $55,000.00 (+0.92%)
- Principal Residence: $283,250 (+0.00%) (purchase price adjusted for inflation)
Liabilities: $68,200.00 (-2.15%)
- Principal Residence Mortgage (readvanceable): $13,800.00 (-10.97%)
- Investment LOC balance: $54,400 (+0.37%)
Total Net Worth: ~$463,700.00(+1.49%)
- Started 2010 with Net Worth: $399,600.00
- Year to Date Gain/Loss: +16.04%
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). 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 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.
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 (+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.
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.
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I have to say I’m impressed with this website: A lot of useful information and with a Canadian perspective to boot! I’m impressed with your regular net worth updates (always positive it seems!). I have generally done an annual net worth update for my portfolio. However, I only recently did another one since 2008 (pre- the crash!). Out of disenchantment, I didn’t have the heart to do an update seeing that my RRSP and other parts of my portolio were severely ransacked. Surprisingly, a recent update showed that my net worth actually went up. Some of it was because the stock market has recouped a portion of its losses. But mostly, it is because I have been rather aggressive on paying down mortgage debt. As a result my debt to equity ratio actually improved a fair bit. Your debt to equity is really good!
fyi, you may know this already but Ally is the rebranded former GMAC(General Motors Finance Arm).
Up to you, I know they are CDIC members with all the benefits that entails, but there are reasons that some companies have to pay more to attract deposits. Ally is rated “B” or junk by the rating agencies whereas ING is rated “A” or investment grade. Not saying its definately going to go bust and CDIC wont pay promptly (subject to you being below the insured minimums) in worst case scenarios but to me 0.7% extra versus ING is not worth the potential hassle.
You know you want to pay off your mortgage so you can have a mortgage burning party!
Seriously July numbers for the RE market are coming out soon.
Be greedy when others are fearful and fearful when others are greedy.
@sampson, that is interesting, i’ve been pretty open with my finances, but I’ve never posted about my RRSP. I’ll try to get something together.
@peter, the thought of opening yet “another” account doesn’t appeal to me. Perhaps if the spread becomes larger i’ll look into it. Thanks for the suggestion though.
FT – Why do you use ING direct with interest rates @ 1.3% when Ally offers 2%?
Just curious. I am getting annoyed with PC Financial and their LOW interest rates. Currently at 1%.
CA’s are the worst. Because they deal with numbers all day long they think they are qualified financial analysts. Definitely NOT the case. All the CA’s I know as little about ‘finance’ as any lay person they just feel more knowledgeable.
@FT – I wish I had a suggestion, I’m not at a point where I have the flexibility you do so I don’t need to worry so much about ‘alternative’ investments. I’m picking stocks and/or entry points so that keeps me busy and prevents my mind from wandering to those alternative investments.
OT but, have you ever posted about your RRSP account? I’m actually quite curious to see how the whole account looks. You publicly post about your SM account, and there is always discussion about how it is overweighted in financials, just curious how the rest of it breaks down. I find there are actually quite few posts on the PF blogs about stock portfolios and diversification, maybe someday I can write something just as a means to get comments about my own strategy.
The accountant doesn’t need to know a lot about the SM, they just need to know about leveraged investing. So here is what you’ll need:
1. A mortgage person to get you a readvancable mortgage
2. A tax person to guide you on the tax implications of an investment loan.
3. A financial person for the investments.
If you do your own due diligence and comfortable with investing, all you really for third party is #1.
I have just called several Chartered Accountants and they do not even have a clue about the Smith Manoeuvre and one told me he knew a bit about it and that it was not worth it as the market is not strong enough to support the idea.
What is the first step I should take here in order to make it work, go to a financial planner or try to find a CA that can help me?
@Sampson, I do have a few ideas, but no set plans yet. I’m considering boosting my dividend equities and even looking into private investments (commercial real estate etc). Another thought it to further invest in my online co. Decisions decisions!
I’m open to ideas!
I think or ‘excess’ cash flow goes about 2:1 into our investments (stocks and bonds) and debt repayment. We’ve still got reasonably sizeable mortgages, but at quite comfortable levels. I’ve been quite comfortable buying during the dips, and currently are building up cash again.
I’m curious what sort of ideas you have lurking in your head as to what to do with your cash in the future. I know you’ve mentioned you might consider getting back into investment properties, but have you got any other ideas?