Welcome to the Million Dollar Journey December 2014 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. 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: 33
- Day Job: Employed as a Real Estate Agent Full Time.
- Family Income: $130,000 (Personal full-time job); $15,600 (rental income before expenses); and, $50,000 (spouse full time job)
- Goals: Mortgage paid off by 36, million dollar net worth by 40.
- Notes: Almost all of net worth is in the real estate market (principal residence and rentals). Current debts are $13,000 owing on a 2009 Audi a4, line of credit used to float business expenses. ($10,000)
My spouse and I currently live in our 4th personal residence since entering the real estate market in 2006. We used to move around town when I was able to find a decent deal to buy. That has all changed now with two kids (4&6), so now my real estate investing is done outside our principle residence. I currently own one rental semi-detached 3 bedroom in my personal name as well as another with 1/3 ownership between family members. We are currently in the process of purchasing a building lot to build and sell a spec home in 2015.
In terms of savings, I’m automatically making bi-weekly deposits into my TFSA to max out the year but I still have plenty of room left. However, my wife’s account hasn’t been fully funded over the years. I’m looking forward to learning more about investing in securities and transitioning away from rentals as they are extremely labor intensive investments that take a lot of time away from my family.
My biggest challenges that I face to making my goal is a lack of budgeting and a lot of discretionary spending. Having the majority of our household income being commission based and somewhat seasonal has been a battle since day one. We deposit all my income into a Manulife one account secured by my rental property and then pay my family account $2,000 bi-weekly but this system has its faults. I’m hoping for some suggestions from readers in a similar position on how they handle this type of pay structure.
On to the net worth numbers:
- Cash: $1,500
- Registered/Retirement Investment Accounts (RRSP): $6,896 (+0.00%)
- Tax Free Savings Accounts (TFSA): $10,849 (+0.00%)
- Rental Property 1: $230,000 (purchased in 2009 for $167,000 price adjusted for average selling price annually) (+0.00%)
- Rental Property 2: $66,000 ($200,000 – 1/3 ownership purchased in 2011 for $160,000 price adjusted for average selling price annually) (+0.00%)
- Principal Residence: $475,000 (purchased in 2012 for $350,000 price adjusted for average selling price annually) (+0.00% )
- Principal Residence Mortgage: $249,493
- Rental Property 1 Mortgage: $107,125
- Rental Property 2 Mortgage: $108,353 –1/3 ownership ($36,117)
- Rental Property Line Of Credit: $17,000
- Mastercard: $0
Total Net Worth: ~$379,111 (+0.00%)
- Started Jan 2014 with Net Worth: $249,924
- Year to Date Gain/Loss: +51.7%
Some quick notes and explanations to common questions:
Any cash I have in my chequing account is currently used to pay monthly bills and living expenses. I deposit all my earnings directly to my Manulife One account.
My savings are held in a Tax Free Savings Account (TFSA) with BMO. I’m currently maxing out my TFSA and hope to do the same with my wife’s account by the end of the first quarter of 2015.
Where Do the Savings Come From?
I’m not a great budgeter or saver yet so the bulk of my savings are in debt reduction to cover investments I have already purchased. (Typically land and investment properties) I find myself that working from behind is the best motivator for me.
My real estate holdings consist of my primary residence and 2 rentals. One owned personally and one held in a corporation with 2 other family members. I’m currently in the process of securing a building lot to build and sell a spec home on.
This article originally was published a few years ago but I decided to pull it out of the archives (with a few modifications) due to its relevance for this year.
I was watching the tax segment on BNN last night and they highlighted some year end tax strategies to take advantage of.
Here is a summary of some year end tax tips for 2014:
- Tax Loss Selling. If you have taxable capital gains this year in your non-registered account, you may want to sell some of your losing stocks. Why? The realized losses will offset your gains, thus reducing your taxable amount. Capital losses can also be carried back against capital gains accrued in the previous 3 years and carried forward indefinitely. Make sure you do this by December 24th though as it takes 3 days to settle your trade. Another note is that the markets close early on Christmas Eve, so trade accordingly.
- Be Patient when Taking Stock Profits. If you want to take profits in a stock, wait until the new year. That way, you’ll have a year of tax deferral.
- Charitable Donations. You have until Dec 31 to make your charitable donations in order for it to count under the 2014 tax year. Also when you file your taxes next year, make sure you file all the donations under one person. Here is an article on how the donation tax credit works.
- Donate Stock instead of Cash to Charities. It may be a bit late for this now because of processing time, but if you donate stock to a charity instead of cash you’ll get tax bonuses. The tax regulations now state that stock donated to a charity will not face any capital gains taxes AND the contributor will receive a tax receipt for the amount donated. Check out my article on “Charitable Donation Tax Credit Strategies” for more information on how to maximize this tax rule.
- Organize your Paper Work. If you are diligent with organizing your tax paperwork, it’s soon time to separate your 2014 receipts/paperwork from your upcoming 2015. What I typically do is clear out the filing cabinet at the end of the year and put all tax paperwork into large envelopes. This comes in handy when filing income taxes before the income tax deadline in April.
- Moving your TFSA – If you are considering moving your TFSA to another institution, December is a great time to do it. Why? Say you have a TFSA with a high interest rate savings account, but you’re now looking to move the money into a low cost trading account. The drawback is that there could be fees associated with transferring funds directly from one institution to another. In addition, if you contribute to a TFSA then withdraw and redeposit the funds in the same year, you could possibly over contribute and face hefty penalties. To avoid the dreaded fees and over contribution rules, simply withdraw the funds from the institution in December to maximize interest gains then wait until the new year to deposit the funds into a trading account. Problem solved!
- Private Corporation Dividends – For you business owners out there, if you expect to have a personal tax refund this year, you may want to pay yourself a dividend to as a way to pull money out of the company without paying tax out of pocket. We pay enough out of the company to reduce our personal tax refund to close to $0. Alternatively, if a dividend would result in personal tax payable, consider holding off until January as you would have another full year before paying the taxes due.
If you have any tax tips to share, please add them to the comments.