Moving Foward…

After posting “How did we get here?“, what is our plan moving forward to obtain the million dollar goal by our mid thirties? I guess that’s the million dollar question. :) Ok, cheese aside, we plan on obtaining wealth through the list below:

1. Continue saving like it’s the great depression.

• I’m really frugal, my wife isn’t as frugal, so as a team, we’re just frugal. As our incomes increase (knock on wood), we plan on continuing our savings rate at around 15%-20% of our gross income. We plan to continue splitting our savings between my wifes pension, my RRSP, my non-registered brokerage account, and a cash savings account. When the cash savings gets large enough, we may just dump some of the cash into numbers 2 and 3 below.

2. Increase our equity portfolio to a large proportion of our networth.

• As our savings continues to grow, we plan on putting more money towards the stock market. I have been doing a lot of research on value and technical/swing trading over the past few years and i’m comfortable picking my own stocks. Thus far, i’ve only been buying small positions for diversity reasons (and it helps that you have a cheap broker, more on this in another post) but these positions will increase as I put more money into the brokerage account. If you’re in a higher tax bracket then i’m a big fan of using an RRSP, which I will continue contribute to every year. Perhaps I will use this blog to keep track of my trades for a reminder of what I dd right or wrong. And hopefully create some discussion among the more experienced stock traders/investors out there.

3. Increase our real estate holdings.

• Thus far, we have our principle residence and a rental property. Since i’m frugal/cheap, I only buy real estate if we can find a home that is selling below market value. The rental property that we own was purchased through a foreclosure auction which we acquired at a 20% discount. If the right deal comes along, we will purchase another rental property.

4. Continue learning about personal finance and applying new strategies.

• What I mean here is applying strategies like the Smith Manoeuvre which is the converting of non tax deductible mortgage into a tax deductible investment loan. I will most likely be posting more about this in later entries.
• I plan on learning more about tax strategies and how to apply them to our personal situation. There was an article on StingyFinance.com that explained how to donate stock directly to charity to obtain the tax credit which would pay for your capital gains tax. Hopefully I’ll get to the point where i’ll have to worry about a large capital gains tax. :) Tax minimization is a key component to building wealth.
• I plan to donate more to charities. Right now, we donate around $500/year to charity which is not nearly enough in my opinion. Hopefully by 2007, we’re donating at least $1200/year and donating more as our income grows.

That’s the plan for now! As you can see, it’s a get rich slow plan. No big business, no big risks. Just a simple plan that takes advantage of the power of saving and compounding. Hopefully it works. :)