you know, i was one of those people who read your blog and then always close it saying- well, it’s nice to read, but hard to follow, as this guy is probably earning six digits income and has several hundreds thousands invested in stocks.

now i see that you are a “normal person” (sorry for this label), living in real world, with “normal” amount of money. great!

Some useful links…
http://www.optionseducation.org/

http://www.optionsnerd.com/

http://www.theoptionsguide.com/

http://www.get122.com/

@Frequent Reader: For some, “a standard balance sheet might not tell us enough (or can be misleading)”; however, as long as you understand the reason for creation and use the consistent approach, then I don’t think it would matter in long run. Also, to whom is it misleading? If it makes sense to the person who created, then all good. Dealing with personal finance should be fun, motivating, and easy to understand. If not, I would’ve lost interest long time ago (I’m too dense and bored easily..lol ) Why make it complicated? The “financial freedom” means different things to different people. Only if you want to compare yourself to others, then perhaps you need specific classification of assets.

I found out that I can do ETF, Do you think this would be a good starting point?
I have no knowledge about how to do trading, all I know is pretty much only the definition of ETF. Do you have some pointer on where to begin? I’ve read some of your post on ETF and your recommendation on using Questrade, but do you have some resources that would be a good starting point to learn how to do this?

Thanks

I understand better now. Your approach makes sense in that respect.

Personally, I count my “passive income” as my measure towards financial independence.

As well, home equity doesn’t have to be a “parking stall” for money. The equity can be used to invest and create income. Although it may not be for everyone (leveraged investing), I use the HELOC to create dividend income.

The liabilities incurred by the cars and house most certainly must be counted as they demand money on a regular basis, and are debts that must eventually be paid.

Whether or not your equity in them is an asset on the other hand is a different story. Yes, if you follow Cdn GAAP and are running a business, for example, it is standard procedure to do so on a balance sheet.

But what I am saying is that for our personal journeys to financial freedom, a standard balance sheet doesn’t tell us enough (or can even be misleading.) I’m proposing that a more useful metric must be stringent in its classification of assets.

Lets say i own 1000 shares of BMO with a cost of $30 (cost $30000). BMO is currently trading at $33> i could sell 10 $34 calls (each call is for 100 shares) for total proceeds of approx $800 cash in my account. If you do this every month it can help you reduce your overall cost. Worst case the shares appreciate more than $34 and at that time the options would be exercised and i would be paid $34K.

So selling options, increase the returns of your portfolio & also reduce your overall cost of your investment. Downside is that you can miss a major move in a stock ie if there was a rally to say $37 on BMO, you would be capped at $34.

good sites: http://www.me.org
use a spreadsheet to calc option premium, ROI etc.

For net worth calculations, if you are going to count the loan that you take for a car (or at least the negative in your cash/savings account) and a mortgage as a liability, then they should count as assets as well.

FT (I think) does a fair job of not overvaluing these (using depreciation on the value of the cars and I believe that his house is still listed as the purchase price…although depending on the housing market that may still be generous).

I’m a regular reader of your blog, and have generally found it quite helpful and insightful.

I have a comment about your net worth statement though. I’m predicating my point of view on the fact that you are using your net worth as a measure of progress towards financial independence from employment. Therefore only assets that can generate a return and money in your pocket should be counted.

Continuing in that vein, your cars then should not be counted as assets any more than your big screen TV or fitness equipment. Your principal residence as well is not an asset unless it is your intention to downgrade and cash out equity when you retire. Even then that might not necessarily work because over long periods of time it is unlikely that your house will appreciate x% and that other properties in your area of the province will not appreciate similarly, resulting in no net ‘real’ gain — the house becomes a parking stall for money.

Since both the cars and the house do not contribute to your ability to become financially free or in any way generate income or capital growth then they belong in the ‘doodad’ category, to steal from Rich Dad Poor Dad. I should point out here that I am not a Kiyosaki devotee by any means, but that he is correct on this issue.

I didn’t mean to disparage your efforts by ’stealing’ more than 200k off your net worth — you are definitely on the right track.

Keep on blogging.

You also mentioned that the low rates are paying your principle down faster, are you reborrowing for your SM right away or holding back to gauge how low the markets might go?

Subversive, you can read more about my decision in the comments of my last net worth update.

One question: I see you sold your investment property. What was your major rationale for that? The reason I ask is because my wife and I currently have a rental property and we’re considering selling it. The value has dropped from the peak, but it’s still got about $50-60k in equity. Do you feel like real estate has a ways to drop down yet?

I’ve been reading The Great Depression Ahead by Harry Dent, and while I’m not through it yet, there is some interesting predictions in there. He predicts house prices will drop to approx 2000 values. If this is the case, I would end up being upside down by about $30,000 on my investment property, not to mention my principal residence. Now, I’m not totally drinking his cool-aid or anything yet, but I figure I’m only doing myself a disservice if I don’t at least consider all my options.

Anyway, I enjoy the blog, keep up the good work.

I am thinking to buy a property – but I dont feel I have enough down payment yet to get a property that I will like and be a good investment. I live in Toronto and hoping to buy an apartment / condo, but nothing concrete going on in that front yet.

John, all “high interest” accounts are fairly low in this low interest environment. I am staying put for now.

Curious Reader, in my non-reg account are various stock picks that I’m hesitant to sell in these market conditions. I don’t really need the cash right now, so I’m going to wait a while longer before pulling the trigger.

Perhaps you can use your cash to pay down any debt that you have first before considering investing the money.

Covered call writing is appropriate for many investors and does reduce the risk of owning stocks. But as already mentioned by another, for those who are very conservative, the collar strategy (write a covered call and buy a put) is available.

I provide good descriptions of these, and other, conservative option strategies on my blog. (link below)

Mark
http://blog.mdwoptions.com/options_for_rookies/

http://blog.mdwoptions.com/options_for_rookies/2008/07/collars-the-ult.html

I am thinking to open a TD e-series as an investment (non-registered) – any suggestion? I have some capital that currently just sitting in a “high-interest” (no so high anymore) chequing account and wondering if you can suggest a better way to invest the money. I already have mutual fund RRSP.

I am not allowed to trade securities because of my job so my option is a bit limited.