Net Worth Update June 2011 (+1.50)
Welcome to the Million Dollar Journey June 2011 Net Worth Update. 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. 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.
The May update was all about moving money from savings into accounts that required contributions such as RRSPs, TFSAs and RESPs. The past month followed a similar trend where we flowed more cash into our retirement accounts. With most of the accounts reaching the maximum allowable contribution amounts for the year, I’ve been considering different methods of using the extra cash. It’s easy to move savings/cash flow into tax sheltered accounts, but that can only go on for so long.
So what’s the plan? For the time being, I’m going to concentrate on building the leveraged smith manoeuvre dividend portfolio (currently $2,200/year dividend income). However, the challenge is that I’m only comfortable with adding to my existing positions providing that stocks are relatively cheap. If I end up increasing my HELOC to levels that aren’t comfortable (I’m not sure what that is yet), then I’ll likely take the extra cash flow and start reducing the balance.
In addition, you may notice that my non-registered portfolio balance has increased as well. Over the past few months, we’ve been transferring money to this account. I’m using a portion of this account as my fun money account for purchasing higher risk equities. Putting my risker assets in this account will allow me to claim capital losses should they occur.
Lets talk about the markets which are fairly volatile at the moment. June was primarily a correction month, but the last week of the month saw the U.S index spike up aggressively. Commodities and energy, in other words, the Canadian Index, took quite the beating which pulled down my portfolios by a few percentage points.
On the topic of assets, one reader suggested that I include the business value in my net worth statement. I’m hesitant to do this as business valuation is a relatively subjective calculation. It was suggested to take the cash on the balance sheet as the valuation but it would require calculations for the after tax value. As there are multiple shareholders, associated marginal tax rates, and multiple methods of withdrawal – each with it’s own taxation, it’s difficult to get an accurate picture. For the sake of simplicity, I’m going to leave the business out of these updates.
On to the numbers:
Assets: $ 624,248.00 (+1.36%)
- Cash: $4,500 (+0.00%)
- Savings: $44,000 (-2.22%)
- Registered/Retirement Investment Accounts (RRSP): $118,000(+4.33%)
- Tax Free Savings Accounts (TFSA): $31,200 (-4.00%)
- Defined Benefit Pension: $34,800 (+1.16%)
- Non-Registered Investment Accounts: $27,000 (+27.96%)
- Smith Manoeuvre Investment Account: $73,000 (-0.68%)
- Principal Residence: $291,748 (+0.00%) (purchase price adjusted for inflation annually)
Liabilities: $65,535 (+0.26%)
- Principal Residence Mortgage (readvanceable): $0 (0.00%) (Paid off in 2010!)
- Investment LOC balance: $65,535 (+0.26%)
Total Net Worth: ~$558,713 (+1.50%)
- Started 2011 with Net Worth: $505,800
- Year to Date Gain/Loss: +10.46%
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.
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 and 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.
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@Iain, here is a portion:
Another good month. It would be nice if you broke out you provided some information about stocks you’re currently holding in your portfolio
Hi FT, Recently in an msn article they ranked countries with the most HNWI (High Net Worth Individuals) with valuations over a million dollars. I think Canada was 7th with about 280 000 HNWI’s. In order to make the list they excluded principal residence (sim. to a car), artwork, and consumer goods.
@Jason, looks like I have a long way to go to join the 280k people!
A lot of people went negative this month. Now the markets have gone up 2-3% since we all did our updates. Hopefully this keeps going and next months update will be huge!
In regards to mortgages, is it not better to invest extra money into the markets rather then pay off the mortgage @ low interest rates?
-1.16% this month. First negative return since June 2010. Friggin RIM. Serves me right.
@FT you’re around the same spot we’re in income-wise – the diff is we have a giant mortgage ~$350k remaining on a $650k house due to living in Toronto, along with two fulltime daycare bills ($2k/month). As our incomes have grown we’ve tried to keep the standard of living reasonable – driving our cars for min 10 years, increasing savings, etc. but at the same time slightly increasing our expenditures for ‘fun’ as well. Still able to save away 30% of after-tax income, so we’re on track for a very comfortable ‘freedom 55’, but definitely not living below our means to the degree we could be. Got to keep from scratching that ‘new car itch’ and I’ll be ok :)
@Sampson, yes having the mortgage paid off really helps with the cash flow – about $1700 per month.
A ha! so it is the mortgage being paid off. With my wife home on Mat leave, our new contributions are quite minimal so we are just riding the market, and last month was a bad one obviously.
Still, YTD we are pretty much on target. Can be winning all the time.
@Sampson, lucky I guess? All the portfolios reported small losses with the RRSP reporting positive due to contributions.
@ Harry, it’s mostly due to a lifelong habit of frugality. We continue to save even though our income has increased over the years.
@ Tom, you can read more about our income here: https://milliondollarjourney.com/how-did-we-get-here.htm. Since then, our income has grown. In 2010, our reported gross family income was $160k, in 2007 it was around $105k.
@canon, thanks for the tip! I’m also a believer of writing down goals, focusing on them, and going for it.
@Jungle, i’m 32 now, the plan is to reach the MDJ milestone by end of 2014. Not a lot of time left! Yes, I still have a full time job. We could probably manage to live off this blog, but it would be very risky. It’s income is highly variable, and with two kids, I’m not sure that it’s the best idea!
Hey Frugal, just wondering how old you are now? Good Job and keep up the good work.
Do you still work at your full time job? Could you live of the income from this blog?