Million Dollar Journey

Building Wealth through Saving and Investing

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A Peek into a Millionaire’s Account Structure

Due to popular demand, QCash has graciously offered to provide more details into his financial life. For those of you who are new here, QCash retired at the age of 36 with a net worth of over $1.5 million.

After my last post (how I achieved $1.8 million in net worth), I suggested to FT that I might provide an outline of how I keep my finances organized and from there pick an account every couple weeks and explain the reasoning for the investments I hold.

Also, I want to let everyone know that I don’t for one minute think I have all the answers. I have learned many things from reading and the internet and believe that I have a pretty good understanding of finance and investments, but it is still a work in progress.

So without further ado, here is are the accounts and what they are for:

ASSET ACCOUNTS

Investments – Non-registered

  • I1 – Non-registered Joint Account – I hold in this account most of my “growth” stocks
  • I2 – Non-registered Joint Account – I hold all my income bearing investments (*I am in the midst of converting I1 to I2 through a leverage and the use of a HELOC – see C3)
  • I3 – Non-registered Account – This is, in actual effect, simply a critical illness life insurance policy with a return of premium rider. My monthly fee is $135 per month and I am in year 7 of a 10 year term. The face value of the policy is $250,000. It is my hope not to collect the $250,000 :-) however, the premiums will be returned at the end of the policy. I initiated this policy when I owned my business and had a sizeable line of credit with the bank.
  • I4 – Non-registered Account – Mine
  • I5 – Non-registered Account – Wife’s

The purpose of these two accounts is to slowly evolve into an income splitting mechanism. To avoid attribution rules, my wife’s money is allowed to compound and any money she receives from our joint accounts, she reinvests. As these two accounts achieve parity, it is our hope to have a “balanced” income stream. In an ideal world, I would like my total income to be the dividends produced by I4 and I5.

Investments – Registered

  • R1 – My RRSP Account – contains my income trust investments
  • R2 – My RRSP Account – contains my fixed income investments – most notably this is through B2B Trust which offers mortgages to third parties. I hold a couple mortgages in this account. As the monthly and bi-weekly payments are made, each year I transfer the cash over to R1 and invest in trusts and REITS
  • R3 – Wife’s RRSP Account – she hold mostly REITS in her RRSP

Children – Informal trusts and RESPs

  • T1 – Child #1′s Bank account
  • T2 – Child #2′s Bank account – both of these are high interest accounts where I put birthday money and “baby bonus” cheques from the government
  • T3 – Joint RESP
  • T4 – Child #1′s Investment account – growth stocks that only provide capital gains to avoid any attribution problems
  • T5 – Child #2′s Investment account – see T4

Cash

  • B1 – Chequing account
  • B2 – Savings account

Real Estate

  • P1 – Primary residence
  • P2 – Rental property
  • P3 – Rental property – jointly owned with my friend

Corporate

  • Q1 – Corporate account – shareholder loan to corporation

LIABILITIES

  • C1 – Credit Card account – CIBC VISA Dividend Card – 1% on just about everything else we buy
  • C2 – PC Financial MASTERCARD – we use this exclusively at our local Real Canadian Superstore and Refuel when there are discounts on gas
  • C3 – Homeowners Equity Line of Credit – I set this up to purchase investments in I2. Without this leverage, I would have had to sell investments in I1 and had a significant capital gain tax.

So there you have it. This represents every account I have. The next time I provide updates, I hope FT will link to this to understand why I have what I do.

I list every investment I have on a spreadsheet and include a field for “type” and “account”. This way I can get a picture of my entire portfolio and ensure that I have the appropriate investments in the appropriate type of account.

The majority of my investment accounts are with Nesbitt Burns and my bank accounts are with Bank of Montreal. I like to consolidate and simplify where I can. I4 is with BMO Investorline as are the kids investment accounts.

I would be interested to know how everyone else organizes their accounts and who they use for various investment brokers? As I said, I don’t think this is necessarily the best way and I hope to eventually consolidate the Investment accounts into three accounts, my RRSPs into one account. However, I will be adding two TFSAs as soon as they are available.

Next time…. an update of the portfolios and an explanation of what I own where.







13 Comments, Comment or Ping

  1. Great post QCash, thanks for sharing. I like how you look at all your accounts as a single portfolio. That is something that I need to look into as I sometimes tend to look at individual accounts on their own.

  2. QCash,

    I am looking forward to reading about your income investments, method of selection, specific stocks in your portfolio.

    I can only dream I could retire at 36.

  3. 3. cannon_fodder

    Qcash,

    We have 4 RRSP accounts – 1 each through work, and 1 each that are self-directed (currently moving them back from RBC DS to E*Trade). My wife’s are both spousal.

    We have 1 non-registered account at IB (because of the low margin interest).

    We have 2 RESP accounts (also moving them from RBC DS to E*Trade). One is for my daughter and the other is a family one for my wife’s children.

    We have 3 chequing accounts – one joint and the others are our own. Partly due to legacy (I’ve had my TD account for almost 20 years) and partly due to a desire for some independence.

    We have had some high interest savings accounts but that was only until we could take that money and apply it to the mortgage (there were annual maximums that we reached). Now that we have a readvanceable mortgage with BMO, if we ever find ourselves in that fortunate position, we can just pay down the mortgage without worry of hitting the limit.

    We have various credit cards – primarily a CIBC Aerogold (because of the points), an Amex Airmiles (because of Costco and Airmiles) and a temporary Citibank M/C because of a 0% balance transfer promotion which we tapped into to pay down the mortgage balance until the term ends.

    Our kids have their own bank accounts but we did take one child’s savings that were in normal savings account and invested it in a balanced equity fund. Fortunately, even as she has gotten older, she has resisted tapping into it – on the other hand, she has not contributed to it for the last few years. It seems that makeup, clothes, cell phone bills, etc. eat into any money she is given.

    We only have one property, our residence, and our mortgage balance is about 20% of the house value. We’re just beginning the process of tapping into the HELOC to implement the SM.

  4. 4. QCash

    FT

    I used to look at all my accounts individually and ended up with 8 balanced accounts :-( But I realized that I have to look at all my investments as one big portfolio.

    DGI

    With FTs continued permission, I hope to make regular contributions and let you know what I have where.

    Cannon Fodder

    My kids are only 3 and 5, and I think it is possible that they could have a sizeable amount in their account by the time they turn 18.

    My wife and I are constantly talking about ways to instill as sense of financial responsibility in them as they grow older to ensure they don’t tap into these accounts on a whim (my plan is just not to tell them they have any money :-).

    I have never been a fan of leverage investing, but I have used my HELOC (C3) to purchase investments (I2) and I while I have been aggressively paying it down with some of the investment income, it is tempting to use it to buy more (especially with the firesale on stocks this week :-) but my wife is uncomfortable with the idea of debt (one of the many reasons I love her).

    Q

  5. Great reading.
    So far I have much less separation of the investment accounts as I’m still in my first capital accumulation years after my arrival in Canada. The proposed split makes a lot of sence and I guess you have significant benefits in consolidation all these accounts at 2 financial institutions.

  6. Qcash,

    That’s exactly what I wanted to hear :-)

  7. 7. Al

    Nice way of organizing assets.More power to you.

  8. 8. JoshuaSBK

    I didn’t see anything in there about an emergency fund. Perhaps if you’re retired it’s not as necessary, but having a nice chunk of liquid cash in a High Yield Savings Account “just in case” may take an additional load of stress off. ShoreBank, who I represent, offers a competitive rate of 3.5%. It’s all online, has no monthly fees and allows easy electronic transfers with up to six other accounts. Check them out at http://shorebankdirect.sbk.com.

  9. Great post. Looking at your portfolio tells me that I’m unfortunately on the wrong path and need to start over. :(

  10. 10. skook

    Qcash – I am curious if you are really “retired” or just doing a different job? The reason I ask is that you are very young. $1.6million seems like an awful lot of money, however if you expect to live to 80 – another 44 years, how are you going to fund it all? If we assume a bond and stock mix that looks to return 8% per year and inflation is 3% (real inflation I think is MUCH higher), and you are raising a family and paying taxes? The numbers dont add up…unless I am missing something

  11. skook, if QCash had a $1 million portfolio invested in growing dividend paying stocks that averaged today 4% dividend, he could withdraw $40,000/year from his portfolio without touching his capital. As well, the increasing dividends would be completely tax free income (split between him and his spouse).

    Combining the dividends, rental income, along with his relatively frugal nature, his 1.6 million should last him a lifetime, if not more.

  12. 12. DocB

    Cannon_fodder, I have some questions about your excel spreadsheet. In particular, the “house value growth rate”does not appear to impact the calculations…is this a feature you are considering in version 3?
    Regards

  13. 13. burke

    I tend to agree with Skook. $1.6million is a lot of money – IF you are 60 or 65 now. How do you support a family with 2 kids on $40,000 – $60,000 per year pre tax? Is this assuming no mortgage payments and no travel at all? With inflation and stock corrections how do you hope to not dip into principal? I have a lot more than this (40yrs old) and am nowhere near retiring – the numbers dont add up.

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