Welcome to the Million Dollar Journey June 2017 Net Worth Update – Team MDJ edition. A select group of readers were selected to be part of Team MDJ which was conceived after my million dollar net worth milestone was achieved in June 2014. Karl the Real Estate Agent was selected as a team member and will post net worth updates on a regular basis. Here is more about Karl.
- Name: Karl
- Age: 35
- Day Job: Full-time Real Estate Agent
- Family Income: $150,000 (Personal full-time job); $TBD (Income from consulting company); and, $150,000 (spouse full time job).
- Goals: Mortgage paid off by 36 (DONE!!!), million dollar net worth by 40 (DONE!!!).
- Notes: Almost all of net worth is in the real estate market (principal residence). Starting to invest in the markets now. Also a sucker for holding second mortgages.
- Cash: $15,000(+500%)
- Registered/Retirement Investment Accounts (RRSP): $87,500 (+954.0)
- TFSA: $19,300(-12.3%)
- Business Account : $15,000
- SAVINGS ACCOUNT : (0)
- Other Corp Account : $15,000
- 2016 Truck Paid For : $40,000
- Building Lot: $400,000
- Holding Second Mortgage @ 12%: $60,000
- Consulting Business: $60,000
- Principal Residence:$750,000 Updated (+25.00% )
- Principal Residence Mortgage : $0 Paid in Full
- Building Lot Mortgage: $275,000
- Wife’s Car Loan: $30,000
- Line Of Credit Used to Buy Consulting Business:$100,000
- MasterCard: $6,300
Total Net Worth: ~ $1,050,500 (+47%)
With the help of the crazy real estate market we did it – Million Dollar Journey accomplished! It really is a strange feeling but in the big picture, nothing has changed. No one in your life really cares lol. My wife and kids don’t love me anymore than before, but there is something inside that feels fantastic.
I remember when I found this blog in 2007 I was so jealous of FT’s commitment. I never thought I would be able to follow him along the way. I have to say that being part of TEAM MDJ has truly changed my life and helped me achieve my goals that at one time were only dreams. Now it all seems easy moving forward because I have done the work on the front end (mortgage free) and not spending everything I make (sadly this is the norm in the real estate industry).
It really has been super simple. Work hard and don’t spend it all. Saving becomes addictive once you see the results. Just like getting up to go to the gym in the morning (at least that’s what my wife tells me).
So off we go to some new and exciting goals but first a recap of some things that I have been up to since my last update.
Building Lot – Purchased an infill lot as it was a great deal and this is what put me over the top.
House value– The valuation of my home has been ultra conservative throughout this whole process. My property peaked at close to $850,000 early in the year but has come down since with the shift in the market. I decided to be more accurate with it value now that I’m at my goal and will update this if it corrects anymore (current value is still on the conservative side).
RRSP: As tax season has come and gone I made my first major contribution to my RRSP in years to reduce my taxable income. I was lucky to be taken on as a client of Scotia Private Wealth which allows me to hold second mortgages inside my RRSP.
So as it stands now the Toronto housing market is in a correction. This has led to more stringent mortgage underwriting which has resulted in decent second mortgage’s to pick from.
Goals for 2017 – (Revised) With another rise in my wife’s earnings due to her crazy work ethic and having our home paid off – I’m super excited for what the year should bring. We are able to live off my wife’s wages completely while saving mine. We have some projects around the house that we delayed while we paid down the mortgage, however, they now need to be addressed. That being said nothing will be paid with credit.
My goal is to invest $100,000 a year towards our RRSP and TFSA until we reach $500,000 invested. I plan to have this completed by age 40. At that point, I’m going to relax on the savings and let the power of compound interest carry me most of the way.
My wife and I have asked our parents about retirement expenses as they seem to have a comfortable lifestyle. Our parents feel that $80,000 a year should be sufficient. Including inflation over the last 20 years, we figure we need at least $1,750,000 in investments to retire quite comfortably with some cushion room.
So by my math. $500,000 invested by 40 years old and compounded equals:
- Age 50- $983,000
- Age 55 – $1,380,000
- Age 60 – $1,900,000
- Age 50 – $1,300,000
- Age 55 – $2,088,000
- Age 60 – $3,360,000
I’ve used both figures as I know the average 20 year TSX return is 9.4% which allows me some wiggle room if I only net 7%.
Stuff I still need to do – Setup my wife’s TFSA for auto withdrawal once home renovations are complete. In addition, I need to add her as a Scotia Private Wealth Client to include mortgages in her RRSP as well.
Diversification – I have heard from the start that I need to diversify to protect my wealth. I can’t totally agree with this as I believe that investing and putting your money into things you understand is much more important. As the real estate market corrects I’m not concerned about losing money but am more excited about the buying opportunity (10% cap rates again for rentals, building lots get real cheap etc).
With second mortgages, I really pick and chose as to what and who gets my money. Properties need to be local, in good condition, loan to value needs to be a very conservative (70% max), and returns need to be between 10-13% plus setup fees and interest penalties. I really don’t feel much risk in these even with the market slowing.
Motivation – During this journey, I learned so much about myself and also about the topic of motivation. I didn’t reach my goal by following the cold and hard rules of saving like:
- pay off your credit cards first;
- invest over paying off your mortgage;
- don’t sell rental property to pay off the house; and,
- buy RRSP’s while your young etc.
For the longest time, I have known that these are 100% the best and most effective way to save yet for me they didn’t hit home. My motivating factor was simple. I look at the majority of people I meet through work and there is no way that they will be able to retire. They are most likely going to work until the day they die and unfortunately, this is the norm and no one sees anything wrong with it.
Every day I see 40-year-olds with $400,000 mortgages on $125,000 a year wages. That scares the hell out of me and that right there is all I focus on. The fear that I won’t be able to relax when I’m old. It’s not about the money for me it’s about the security it brings. It took me a long time to recognize that this is what works for me. I only mention this because it has changed my live for the better. It’s whatever gets your butt in gear and gets you focused and only you will know what that is. Don’t worry about anyone else’s thoughts except what drives you. Thanks one more time to MDJ everyone on the site for the comments, encouragement, tips etc that have sped this process along for me.
It took me a long time to recognize that this is what works for me. I only mention this because it has changed my live for the better. It’s whatever gets your butt in gear and gets you focused and only you will know what that is. Don’t worry about anyone else’s thoughts except what drives you. Thanks one more time to MDJ everyone on the site for the comments, encouragement, tips etc that have sped this process along for me.
So now it’s the race to $500,000 by my 40th birthday. When I reach that goal I will mentally allow myself to go buy whatever car I want.
Again I thank everyone for the support and welcome any comments, questions, concerns etc.