Comments on: May 2008 Net Worth Update (+3.12%)

By: FrugalTrader

FrugalTrader — Mon, 23 Jun 2008 15:22:57 +0000

DAvid, that’s another great point. Even though my house is fairly new, it has increased significantly in value. However, I don’t think i’ll be adding onto the value of the principle residence until the new year.

Yes, the (oil) economy here is booming. It’s VERY difficult to find a starter home at a reasonable price these days.

By: DAvid

DAvid — Mon, 23 Jun 2008 15:10:10 +0000

Also, the value of housing in the St. John’s area has increased about 16% in the past year. http://www.canajunfinances.com/2008/06/12/dollar-parity-means-18-more-expensive/

It’s good to see such confidence in the economy. Danny must be a popular guy in financial and business circles.

DAvid

By: FrugalTrader

FrugalTrader — Sun, 22 Jun 2008 12:59:26 +0000

Hey Derek, valuations haven’t changed, we sold our old house and built a new one. The principle residence value is our purchase price.

By: Derek

Derek — Sun, 22 Jun 2008 12:40:57 +0000

Nice job.

I was wondering why so large a jump in the valuation of your realestate holdings from ‘07?

By: The Financial Blogger

The Financial Blogger — Mon, 02 Jun 2008 10:48:05 +0000

It all depends on how you present it ;-) I’m sure there are some renovations to be done on your rental property… oops that’s my accountant friend talking right beside me ;-) lol!

Seriously, If you want to make it “better”, you could cash in a part of your non leveraged investment and do the same thing. And everything would be 100% right ;-)

By: FrugalTrader

FrugalTrader — Sun, 01 Jun 2008 21:50:15 +0000

FB, money borrowed that is used for non investment purposes is not tax deductible, even if I refinanced the rental property to do so.

By: The Financial Blogger

The Financial Blogger — Sun, 01 Jun 2008 21:18:54 +0000

Quick question:
why don’t you use your savings to pay off your “other liabilities” and then re-borrow the money from your rental property in order to put it down on your new house? interest becomes tax deductible and it doesn’t cost a penny ;-D

By: paulette

paulette — Sun, 01 Jun 2008 05:06:14 +0000

Congratulations to you!

By: Chris

Chris — Fri, 30 May 2008 22:53:39 +0000

Nice job MDJ,
You are walking the walk while teaching so many how to do it as well. This is one of the better finance blogs on the web and the RSS subscriber increases clearly show that (I am sure traffic increases are even better).

Keep up the good work – I know how time consuming and rewarding writing a blog can be.
-Chris

By: DAvid

DAvid — Fri, 30 May 2008 15:06:22 +0000

Since the value of the home is the largest portion of the net worth statement, Patrick’s comment makes sense, the increases in the other investments will make themselves apparent as they grow in proportion.

Also since the economy usually moves largely in parallel over short periods of time, a similar rate of increase across most sectors would be expected on a month to month basis.

DAvid

By: FrugalTrader

FrugalTrader — Fri, 30 May 2008 14:11:53 +0000

Patrick, no, didn’t notice that until you mentioned it! Even if housing prices go down, there is a fairly large buffer between what I declare on my net worth statement, and the actual worth of my home. BTW, i’m in Newfoundland. :)

By: Patrick

Patrick — Fri, 30 May 2008 04:27:50 +0000

Have you noticed that your net worth is essentially equal to the value of your home? In other words, a 1% move in your home’s value translates into a 1% move in your net worth. (Or, if you’re a Garth Turner-style pessimist, a 50% decrease in real estate prices would wipe out half your net worth.) For my own personal taste, the Toronto real estate market is not somewhere I want to be exposed right now.

By: DAvid

DAvid — Fri, 30 May 2008 00:08:44 +0000

Frugal Trader said: “LOL, very true DAvid. It’s a psychological thing where, to me, it feels better to increase assets than to decrease liabilities.”

Yes, but your executor will place assets against liablilties and consume the assets anyway!!!!!!

DAvid

By: FrugalTrader

FrugalTrader — Thu, 29 May 2008 21:29:55 +0000

Hey CF, yes, the calc shows that in 7 yrs, the mtg will be paid off with the heloc balance greater than the portfolio with conservative growth assumptions.

Also, the heloc is for investing only. You may have noticed that my portfolio balance is smaller then the total investment account. The reason being is that there is still some cash in the investment account waiting for the right opportunity to be deployed.

By: Cannon_fodder

Cannon_fodder — Thu, 29 May 2008 20:08:09 +0000

FT,

Is it the case that your HELOC is strictly being used for borrowing to invest?

One thing that may happen (especially if the HELOC interest rate is higher than the investment portfolio’s growth rate – not hard to do with low growth, high yield dividend stocks) is that when the mortgage balance is 0, the portfolio could be smaller than the HELOC.

One has to keep in mind that without implementing the SM, it is likely that the overall networth would be worse since your mortgage balance at that point in the future would be higher than the difference between the HELOC and the portfolio’s value.

By: FrugalTrader

FrugalTrader — Thu, 29 May 2008 15:52:33 +0000

LOL, very true DAvid. It’s a psychological thing where, to me, it feels better to increase assets than to decrease liabilities.

DGI, yes you are right, I may have too much cash on hand. Who thought that would be a complaint? To answer your mortgage question, I have a great rate of prime (4.75%) – 0.85%. So relatively, the rate is low.

By: DAvid

DAvid — Thu, 29 May 2008 14:42:00 +0000

Frugal Trader said “After all the talk in the Manulife One thread, it motivated me to take some of my savings ($15k) and dump it onto my mortgage debt.”

Good to see you put your money where your ‘blog’ is! If you hold it in relatively liquid investments, it is still available as an emergency fund.

DAvid

By: Blitzkrieg

Blitzkrieg — Thu, 29 May 2008 14:30:20 +0000

Nice gains overall for the year so far.

By: Dividend Growth Investor

Dividend Growth Investor — Thu, 29 May 2008 13:43:27 +0000

FT,

I just realized that you have 10% of your assets in fixed income/cash. I hope that your mortgage interest is not too high compared to your savings rate.
I think that for people in their late 20s early 30s it’s typically best to have as little cash equivalents ( money market, cd’s, deposits, savings) as possible. But that’s just my 2 cents!
Btw Good job this month!

By: FrugalTrader

FrugalTrader — Thu, 29 May 2008 12:30:53 +0000

Thanks guys! Most of the increase was due to the markets moving in the right direction.

Telly, since you use your LOC as an emergency fund, say you needed to replace your car. I guess you would use the LOC then pay it back as fast as possible?