Net Worth Update May 2011 (+1.18%) – Money is Moving Edition!
Welcome to the Million Dollar Journey May 2011 Net Worth Update – Money is Moving Edition. 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.
Last month, I wrote that I needed to make some annual contributions and some readers commented that I should be a little more proactive and contributing a bit earlier. Of course, they are right. To fix this, I moved around a significant amount of money this past month and started putting some of that cash to work.
To start, we opened an RESP for our second child and deposited $2,500 to capture the maximum matching from the government ($500). Actually, to be more accurate, we changed the individual TD e-series RESP account to a family account. This setup gives us a more convenience during accumulation years more flexibility during withdrawal years.
Next, we deposited another $5k in my wifes TFSA and $5k into my RRSP account. We still have a good bit of contribution room remaining for this year, but we will top it up when we receive our official Notice of Assessments. Besides the tax sheltered accounts, I also transferred some cash into a non-registered trading account.
These transfers were mostly paid by cash savings, and by taking some money out of the business via dividend.
On to the numbers:
Assets: $ 615,848.00 (+1.08%)
- Cash: $4,500 (+0.00%)
- Savings: $45,000 (-23.73%)
- Registered/Retirement Investment Accounts (RRSP): $113,100(+4.05%)
- Tax Free Savings Accounts (TFSA): $32,500 (+20.37%)
- Defined Benefit Pension: $34,400 (+1.19%)
- Non-Registered Investment Accounts: $21,100 (+86.73%)
- Smith Manoeuvre Investment Account: $73,500 (+0.68%)
- Principal Residence: $291,748 (+0.00%) (purchase price adjusted for inflation annually)
Liabilities: $65,368 (+0.25%)
- Principal Residence Mortgage (readvanceable): $0 (0.00%) (Paid off in 2010!)
- Investment LOC balance: $65,368 (+0.25%)
Total Net Worth: ~$550,480 (+1.18%)
- Started 2011 with Net Worth: $505,800
- Year to Date Gain/Loss: +8.83%
Some quick notes and explanations to net worth questions I get often:
The Cash
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.
Savings
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.
Real Estate
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.
Pension
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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Very impressive numbers Cannon! Why not take more of your capital into producing steady dividend income to ensure that your monthly expenses are covered, then take the remaining to trade with?
FT,
I believe my dividends will provide about $22-23k annually. So far the trading strategy created about $23k per month last year and $100k per month this year, but these were averages since some months there was no trading.
If I can produce $50-$60k per month, every month going forward, then this would justify early retirement.
@canon, sounds like a smart move! Have you ironed out plans on how you are going to produce income from your investments?
FT,
No the reason is that there is an exponential increase in the stress and attention one must give as the amount of capital increases. Plus, I’ve seen I had an issue with holding on too long trying to squeeze every last dime out of the investments.
Finally, in retirement, bills come frequently – at least monthly. So, proper discipline will need to be ingrained to have profitable months EVERY month.
I don’t plan on stopping this investment strategy simply because it has been far too successful.
Ticker,
Loans used to service investment loans are similarly eligible for income deductibility as the loan is still attributable to the investment. If you intend to try this, don’t take my word for it–ask your accountant (and ensure you’re doing it correctly).
Andrew,
If FT pays off the HELOC with a mortgage could he have issues with still attributing the interest payments to the non-registered portfolio funding and the interest payments for the mortgage being tax deductible?
Thanks MDJ-those are very useful articles :)
@Canon, is it because you are moving to preserve capital to fund retirement? Do you plan on converting all your new cash to income producing investments?
@youngandthrifty, thanks for the kind feedback! Incorporating isn’t too tricky, most provincial jurisdictions allow you to do it online which is fine for a simple setup. If you want to get into shareholder classes etc, then it may be an idea to contact a lawyer.
You’re doing fantastic! I think you are going to hit the big number ($1 MIIILLLLIOONNN dollars) in no time.
I have a quick question about incorporating the business- is it difficult to do? I’m currently contemplating that for myself, but it seems complex.
FT,
Well if that’s the last time you had a negative NW you’ve managed your state of affairs quite well. You are marching inexorably towards your stated objective with determination!
In a way, yes, I’ll be “taming down the trading”… I’ll typically put less capital in play but have well defined monthly targets for absolute $ or percentage gains.
May 2011 will likely be the last big month for me with this new strategy. I exceeded my 2011 target in that one month. Proof that smaller, more frequent trades are better will take the rest of the year to uncover.