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A Net Worth Update from QCash (he retired at age 36)

Back by popular demand, the 36 year old millionaire retiree, QCash, is back with an update. In the original interview with QCash in 2007, he explained about how he became financially free by accumulating a $1.5M net worth by the age of 36.  It’s been about 8 years since that interview, which has resulted in a lot of growth in his portfolio.  See below for the numbers.

You can read QCash’s other articles on MDJ here.

First, thanks to FT for allowing me to provide you all with an update.  When he asked me to do an update, I looked at my last post and realized that six years had flown by in a blink.

Second, I thought it would be prudent to give you an update on my portfolio and  do a second post in a couple of weeks to let you know what I have been up to.

Third, my thinking on a few things has evolved over the past few years given that my kids are older, my wife’s tolerance for risk is growing and I remain committed to receiving an investment income that addresses all our needs with the hope of putting as much as possible on “auto-pilot”.

Those of you who have followed early on remember that I am not averse to using my margin account to buy stocks or mutual funds when opportunities present themselves but over the last few years, I have been more inclined to try to reduce the margin account.

Net Worth Statement

So, as of March 31st, here is an outline of my assets (using round numbers).

Assets:

  • Cash on hand: $98,000
  • Non-registered: 1,460,000
  • RRSP/RIFS: $430,000
  • TFSAs: $88,000
  • RESP: $152,000
  • Trust accounts: $90,000
  • Principal residence: $450,000

Liabilities:

  • Margin account: 318,000

Net Worth: $2,450,000

Common Questions:

1) Why so much cash?

My wife and I have been planning a major kitchen renovation for the past couple of years.   I keep holding on to cash with the idea that the original budget was for $50,000.   I am also aware that my wife’s van (a 2004 Dodge Caravan) is on it’s last legs.  I would like her next car to be four wheel drive to deal with our winters.    The kitchen renovation is probably going to happen this summer or next, once we can decide what we want (or more specifically, what she want s :-)

2) You used to list your property at the purchase price, did you buy a new place?

No, this is the house we are going to “be carried feet first out of”, according to my wife, but I have recognized that listing  a house we purchased for $250K 15 years ago is not prudent.   Instead, I have been accruing our renovations to the property as increasing the assets.   The house is still worth more according to the bank (we had it assessed at $684K about 4 years ago).

Instead, I have torn down my garage and replaced it with a stand alone building ($125K), we did some major repairs to the septic and cistern systems ($25K) and completely gutted and replaced a bathroom ($25K) as well as some incidental work around.  My feeling is that any project that costs us more than $5000 and is “capital” in nature should be accrued to the value of the house.

3) RRIFs???

Yes, RRIFs.   A few years ago, it occurred to us that my wife was not earning any more RRSP room but her account was growing in leaps and bounds.   Since this income will be significant when we are older, we have decided to start reducing the amount of the RRSP by converting it to a RRIF.   The income is attributable to her, but we also structured the non-registered account so that the margin interest is attributable to her.   Thus, the interest we pay is covered by the RRIF payment and the net effect on her  net income is nil.

In the next update, I will try to let you know what I have been doing with my “retirement”.

I know there may be more questions, and I will address any in the comments.

If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).

About the author: QCash is a young retiree and self made millionaire. He has built his net worth up to $1.5 million by the ripe age of 36. QCash writes the occasional article for Million Dollar Journey to share in his experience of obtaining a large net worth at a young age.

You can read our interview with him here.

{ 36 comments… add one }
  • Finance Journey April 13, 2015, 9:50 am

    Wow, your net worth is almost 2.5 million dollars. Great inspiration for those who just started their million dollar journey like my-self.

    It seems like you use/used debts to build your wealth.I have a huge credit cards and margin loan debts – but they are called good debts. I am using them to build my assert in a systematic way, like you and FT did, and I am very success so far.

    Looking for more inspiration stories.

    Cheers,

  • Qcash April 13, 2015, 9:58 am

    Hi Finance Journey

    Make sure that you are not using high interest credit to obtain assets.

    Also, while I can’t speak for FT, in my case, I only used debt to buy assets when I knew:

    1) The distributions/dividends could service the debt; and
    2) I did not need to buy the assets

    In some of my early stories, you will see how my wife and I ensured we had eliminated debt as soon as possible.

    The last thing about investing on margin or with debt, make sure you have a strong stomach that can weather the highs and lows, and make sure you know when to pull the plug (set up stop limits, lock in gains, etc..)

    Best

    QCash

  • FrugalTrader April 13, 2015, 10:55 am

    I’m with QCash, I only have debt with interest payments that are easily covered by the distributions.

    Thanks again for sharing your story QCash. Maybe in the next article we can talk a little about your investment strategy, safe withdrawal rates, and perhaps your expense expectations before retirement and reality.

  • Dwilly April 13, 2015, 11:17 am

    Good stuff & congrats. Question, as I see your NW has continued to grow in “retirement”. Curious about your cash flows/rate of withdrawal from the portfolio? Do you really have no other income, and living entirely from your assets, or is there some other source of income?

  • Under The Money Tree April 13, 2015, 12:11 pm

    Congrats on the high net worth.

    With such success already ‘banked’ I’m surprised you’re using margin at all, let alone to the tune of $318k. Surely if you’re already FI you should significantly reduce the risk you are running, kick back and enjoy life?

    Of course I don’t know how much risk you’re running but if I was FI already I’d be looking to take as much risk off the table as possible.

  • QCash April 13, 2015, 1:26 pm

    @Dwilly

    My main source of income is from distributions from the Non-Registered accounts. These distributions consist of a portion of Return of Capital, so indirectly, my book value is reducing year over year. This will hit me when I sell (no intention) or for my children when I die (not my problem :-).

    In the interest of full disclosure, and I mentioned this to FT in our email exchanges, I do occasionally provide project services if asked for either political campaigns or for my former company. This “found money” is usually put towards holidays and it is never more than $10-15K

    I have also been recently elected to local politics (as of last Dec) and I am recieving a salary based on that. It is part time but it does pay $30K. I haven’t decided where that will go, but I my passion has always been politics, so I don’t consider it a job as much as a calling. :-)

  • QCash April 13, 2015, 1:31 pm

    @Under the Money Tree

    Agreed that being FI, I shouldn’t worry aboutt margin. But being young I do have a higher risk tolerance.

    The initial purchase of securities with the margin account was made during the downswings as I was transitioning from capital growth stocks to income and distribution paying stocks/funds/etc…

    The idea was that as I sold some of growth stocks on the upswing, I could mitigate any capital gains and pay off the margin account.

    However, I have been fairly successful paying down the margin account without selling the growth stocks, so as I pay it off, my account still grows.

    That said, I do think there is something to having some debt to maintain discipline in making payments. I try to pay off a few thousand every month with a goal of having it paid off completely in 5 years without selling any of the underlying securities.

    Hope that makes sense. Let me know and I can clarify further.

    Best

    QCash

  • Yves Quevillon April 13, 2015, 1:49 pm

    Congrats!!

    I have $20K cash to pay for a used Venza. Should I finance it over 7 years ($5.7K total interest) or should I invest the $20k, which would only need a $3.5% return to break even over 7 years, and could grow to $30.7K with 6% return?

    Thanks

  • Qcash April 13, 2015, 2:59 pm

    @Yves

    It depends on your personal situation, but I don’t like debt. The vehicle loan interest in not tax deductible, but investment income is taxable. To get 6% return to break even is tricky.

    Might I suggest that you pay for the car, and then be disciplined enough to put what the equivalent car payment into investments suitable to you.

    Keep in mind that I am neither an investment expert, nor a certified financial planner, nor do I play one on television.

    QCash

  • Dwilly April 13, 2015, 5:02 pm

    Appreciate the reply. As FrugalTrader noted, I’d be interested (to the extent you are willing to share) in more specifics re how much you live on (before vs. after retirement), how much you withdraw or receive from distributions in a given year, etc..

  • The DJ April 13, 2015, 5:34 pm

    Congratulations on keeping your net worth going strong. Always nice to hear how people are doing years into early retirement :) We hope reach financial independence in a couple years as well and looking forward to it. We currently have high cash reserve in the hopes of doing a garage conversion and maybe using it as a short term rental and/or guest suite for when we have family/friends from out of town. Was your garage conversion mostly a DIY or did you use contractors? We have never taken on such a large project ourselves, but debating what pieces we should do ourselves vs. outsourcing (plumbing, electrical).

  • QCash April 13, 2015, 9:02 pm

    @The DJ

    We found the plans and style we wanted on line and then did the preliminary planning ourselves (zoning/building permits) and then had three quotes.

    The contractor did everything but interior finishing.

    Since the upstairs was a loft, I hired a friend of mine who is a handyman to do the interior finishing. I was able to act as his helper, lugging drywall, flooring and paint. That saved me a lot of money but took longer than normal. But it was a good project.

  • LifeInsuranceCanada.com April 13, 2015, 9:07 pm

    re: Kitchen reno. Check out IKEA. Seriously :). It’s probably not what you think of when you think IKEA. It’s like /14 the price of a mainstream kitchen and every bit as good (maybe better).

  • Qcash April 13, 2015, 10:31 pm

    @LifeInsuranceCanada

    We were skeptical about IKEA, but ended up doing almost 80% of our bathroom with IKEA. I would have no problems looking to them for our kitchen plans.

    I am looking to do some structural changes, which may take a little more effort, but IKEA is in the running for sure!!!!

  • nobleea April 14, 2015, 12:48 pm

    Inspiring story, as always.
    Question about the RESP’s. It’s a very nice balance. How old are your kids? Do you put in more than the max CESG amount? How is it invested? Is it hands off couch potato type or individual stocks?

  • Gen Y Finance Guy April 14, 2015, 4:23 pm

    Looking forward to the next update to see what you have actually been doing in retirement.

    Also, would be interested to see what your monthly expenses look like vs. you monthly cashflow from distributions.

    Cheers!

  • Mike April 14, 2015, 7:01 pm

    I still don’t get it. In 2007 QCash had 1.2 M in investments (I presume net, i.e. market value minus debt). He was 36 in 2007; say, he started saving at the age of 18, saving on average 20% of his income. Question – what was the dollar amount of savings per year and rate of return to get to 1.2 M in 18 years? Seems like either 20% of income was far above average or, if his savings were modest – for example, 20K per year, then his investment skills are so good that he was getting 30%-100% return per year, each year, surpassing most famous investors.
    Can we get more details here, please?

  • Kunwak April 14, 2015, 8:05 pm

    Mike: 20k/yr over 18 years at 13%/yr amounts to ~1.43m…

  • My Own Advisor April 14, 2015, 9:30 pm

    QCash, I loved this update. Very inspirational.

    We’re certainly not at your net worth (about $1M now) but working towards it.

    I was surprised to see a margin north of $300k with almost $1.5M in non-registered assets.

    I suppose if it were me, I’d kill or have no margin account and simplify things…just live off investment income, keeping the TFSAs intact “until the very end”.

    I think you’re smart to keep this much cash if you’re doing a major reno or two, and you need a vehicle.

    I am optimistic for our next car, we can pay cash for it.

    I look forward to the next update!
    Mark

  • Qcash April 15, 2015, 7:50 am

    @nobleea

    Good to hear from you!

    Yes, the RESP is maxed out ($50,000 per child). I did make efforts early on to maximize my CESG (limiting my contributions to $2500 per child to get the $500 Grant). But I reached a point where I could fully fund the RESP and rely on the interest free growth to maximize potential.

    This resulted in me having approx $38,000 assisted and $62,000 unassisted in the RESP.

  • Qcash April 15, 2015, 7:52 am

    @Gen Y Finance Guy

    If FT is willing, I would love to do another update to let you know what I have been up to.

  • Qcash April 15, 2015, 7:57 am

    @Mike

    It was not linear growth or completely by accident. I was able to buy realestate with 5% down at young age (18) and sell later on making good return.

    I also made use of margin (borrowing to invest) where/when appropriate.

    But the thing that made the biggest difference was that my wife and I paid off our house as soon as possible, allowing for us to save even more.

    I would suggest that in the first couple years of marriage, we saved more than 40% or our income. And then when we decided to have kids, we wanted to see if we could live off just my salary, so we stashed her full take home salary for a year and a half.

    It is amazing how that mind set of frugal living has helped.

  • Qcash April 15, 2015, 7:59 am

    @kunwak – I definitely didn’t earn 13%, but there were some early years I did better than others. And as I said, real estate helped goose the returns a little bit.

  • Qcash April 15, 2015, 8:06 am

    @My Own Advisor

    I was always more willing to take a risk on margin than my wife. The plan for the margin account was to purchase more dividend/distribution paying investments and replace the growth stocks. But selling the growth stocks would have triggered a pretty big capital gains for me.

    So, I purchased what I wanted on Margin, with the idea that I would sell the stocks over time to mitigate the capital gains and reduce the debt. I also figured that as interest rates increased, I would be more aggressive about paying it down.

    But the returns have been pretty good and interest rates have not gone anywhere, so I have been slowly whittling the margin down from distributions. I also make sure that the balance has been reduced by at least the amount of return of capital issued, so it keeps it clean if CRA comes calling.

    The other thing was that I had been hoarding cash for the renovations. Keeping in mind that the interest in my margin account is tax deductible. If I pay down the margin account with my cash and then have to borrow for the kitchen reno or car, that interest wouldn’t be tax deductible.

  • Qcash April 15, 2015, 8:09 am

    @nobleaa

    Sorry, you asked about the make up of the RESP. I use a balanced income fund (BMO Income Fund – series D = it has a 0.80% MER and is available to their Investorline clients). I did start off with a “couch potato” balanced approach but have transitioned over to this fund. The kids are now 12 and 10.

  • SST April 15, 2015, 11:11 am

    @Q re: “i was able to buy realestate with 5% down at young age (18)…”

    How influential were your parents and peers in regard to financial education and decisions?

  • QCash April 15, 2015, 11:57 am

    @SST

    My parents were a huge influence but not in the way you might think.

    My dad was not good at financial planning and, after my parents split up, I watched my mother work hard and save to make a better life for my sister and I. It also meant that my first job was at a young age, picking fruit and then at McDonalds.

    I had a good work effort instilled in me, but I also knew I wanted to be financially independent as soon as possible.

  • Sampson April 15, 2015, 3:22 pm

    Great to see an update… I guess FT was dropping hints here and there by promoting the old articles….

    Great story. Amazing to see how everyone has changed in that period, both on the balance sheet and with priorities. I would say our story/numbers are similar, but much more monies in real estate, and more monies in our pensions.

    I have discussed different possibilities with my wife to begin ‘unwinding’ the professional careers for something we would much rather enjoy so I am very eager to hear about what you have been doing with your time. Also, your post has convinced that I should max the RESPs early also… since we will continue to work for at least a little while the dependence on a non-registered account over $1M isn’t a huge priority for us.

    Interesting that you have already begun with investments with ROC distributions. I always thought that when the time comes, to reduce cap gain liabilities by buying the same holdings on margin to increase the average cost of the investment, then selling the whole lot. Does this mean you have been investing in ROC paying investments all along? Don’t these have some performance lag when compared to holding underlying investments directly?

  • Dan @ Our Big Fat Wallet April 15, 2015, 4:16 pm

    QCash, thanks for the update. Very informative. Would you mind giving more details on your current portfolio holdings? Specifically the non-registered account. From the old articles it looks like you held a variety of different investments in 2008, is everything still the same? I’m curious to know what your strategy is for your TFSA/RRSP/non-registered accounts. Thx

  • QCash April 15, 2015, 9:10 pm

    @Sampson

    Without question, ROC products lag. I spent a lot of my initial investing years chasing yield, trying to make sure I got the best return and beating myself up when one of my investments under performed. One thing I decided to do as I transitioned over was to not put as much emphasis on gross returns, but to make sure distributions were able to pay mylifestyle expenses. Trying to match investment vehicles with my needs. The idea of buying the funds with a ROC was to make sure cash flow was covered. I purchased a bunch on margin, as I planned to sell off other investments as prices were improving. However, I found that regular dividend income from my existing stocks plus distributions from my income funds more than covers interest on the margin account and allows me make regular payments to the margin account and cover my living expenses. I make sure that my margin balance is reduced each year by at least the amount reported as ROC on my T3s and T5s to make sure I don’t run afoul of CRA, but it has worked well. Caveat: this has worked since my interest rate on my margin account has remain low. If interest rates had spiked (which I fully expected the way the Fed was printing money in the U.S.) I would have had to pull out quicker as the interest charges could have been nasty. Fortunately, with interest rates low (and lower, I pay 2.85% on my margin account currently), I have been able to enjoy both the growth both the stocks I own and the capital of the income fund has remained relatively constant despite paying out the ROC.

  • QCash April 15, 2015, 9:12 pm

    @Dan

    FT hasn’t given me the go ahead, but I am willing g to share my portfolio holdings. I still try to follow my original plan of income type matched with investment vehicle to maximize tax advantage.

    I have a slight modification now that I am drawing down my wife’s RRSP as a RIF, but we do max out our TFSAs.

  • C April 19, 2015, 5:36 am

    Inspiring story, congratulation! Great rate of return on your investments after retirement.
    Appreciate the transparency.

  • Lance April 20, 2015, 1:14 am

    Impressed.

    I assume the tfsas are maxed out? Are you segregating the dividends from the non registered accounts and sending them to the tfsas and or the debt servicing/repayment obligations on the loan

  • QCash April 23, 2015, 8:58 am

    @C – Thanks

    @Lance – Essentially yes. I am leaving as much in the registered accounts to accrue as possible. The non-registered dividends go to topping up TFSAs (another $9000 going in thanks to the latest budget) and servicing the margin debt.

  • Well-T April 30, 2015, 10:28 am

    Well done Q! At 37, my wife and I are sitting on 1.7M net worth including a paid off house so our current situation resembles yours a few years ago. I would love to hear more about your investments.

  • JDC May 1, 2015, 3:15 pm

    Please tax effect the accounts. What’s the amount of the deferred tax liability? At present interest rates, discounting it will have little impact.

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