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Net Worth Update April 2015 – Nobleea the Oil and Gas Engineer

  • Name: nobleea
  • Age: 36
  • Net Worth: $747,709
  • Day Job: Engineering manager at oilfield services company, Teacher (wife)
  • Family Income: $145,000 (main job), $10,000 (part time job), $70,000 (wife main job), $10,000 (wife part time job)
  • Goals: Million dollar family net worth before 40, Retirement from primary job at 50 (for me)
  • Notes: Owns primary house. Owns tear down house across the street. (to be torn down for new family home)

We live in Edmonton where incomes are high and housing prices are fairly reasonable. Some may roll their eyes at the high family income and say that a million dollar journey is going to be pretty easy. I have a plan to retire at 50 and pursue other things. My wife will likely continue working until it makes sense to retire with her DB pension as the penalties for early retirement are pretty severe.

We recently bought a tear down property across the street from our home. The renters moved out this month and it will be torn down in the next few weeks. Once we take possession of the new build, our current home will be sold. Several people have approached us to buy our current home off us when they found out we would be selling in the future. We are currently planning on building a detached garage with a 1BR apartment above it which would bring in an extra $1K a month.

We travel a lot for pleasure but are pretty frugal otherwise (no cable, coupons, pay and talk phones, dine out or take-out a few times a year). I try to keep our cash balances as low as possible and want every spare dollar going towards debt repayment. I would say our living expenses are low relative to our income. We have tried hard to avoid most lifestyle inflation.

We have a few goals for this year including opening a TFSA for both of us and funding with a minimum of $2K each, signing up for additional term life insurance for both of us to top up that which is included in our group plans, reduce our HELOC balance by 60K.

There have been some changes since our last update here. For one, my wife went back to work for 4 days a week and then received a promotion to assistant principal for the rest of the school year. At my work, the company has instituted furloughs for the next 5 months which gives us an unpaid long weekend every two weeks. On the other hand, we did receive bonuses for last year which was paid out in restricted stock, vesting over the next few years. It’s not listed in any of the values below but is worth around 22K at current prices. It will show up in the numbers below as it vests.

We will be sitting down with the bank this week to finalize financing for the new build. At the moment I am considering the standard 5yr fixed 25 yr amortization. Depending on the rates, we’d also consider going with variable and setting our payments at the fixed rate. We could do with a shorter amortization, but we’d prefer to minimize the payments for now and focus on building investments with the extra cash flow. I feel our investments are light at the moment and would like to build them up. We have a new goal of $1mil in investable assets when I am 40 which will certainly be a stretch. Our starting point is about $300K now.

On to the net worth numbers:

Assets: $1,153,085 (+1.20%)

  • Cash: $2,018 (-24%)
  • Registered/Retirement Investment Accounts (RRSP): $151,567 (+6.1%)
  • Tax Free Savings Accounts (TFSA): $0 (+0.00%)
  • Defined Benefit Pension: $91,000 (+2.2%)
  • Non-Registered Investment Accounts: $3,725 (-60%)
  • Principal Residence: $458,000 (+0.00%)
  • Tear Down Property: $375,000 (+0.00%)
  • Vehicles/Other: $56,175 (-3.9%)

Liabilities: $405,376 (-3.0%)

  • Principal Residence Mortgage: $0 (Paid off in October)
  • Tear Down Mortgage: $293,205 (-1.0%)
  • HELOC: $104,434 (-10.1%)
  • Car Loan: $0 (Paid off in December)
  • Credit Cards: $7,737

Total Net Worth: $747,709 (+4.18%)

  • Started 2015 with Net Worth: $717,634
  • Year to Date Gain/Loss: +4.19%

Some quick notes and explanations to common questions:

The Cash

Cash includes bank account balances in two accounts, plus any gift card balances. We try to keep as little money in bank accounts as possible and make mortgage prepayments with it instead. We use cash flow modeling to predict the maximum amount we can put towards debt today without having a negative balance in the future, taking all one time or non-regular bills in to account.

Loans and Credit Cards

The credit cards are paid off in full every month with no interest due. We put all our expenses on credit cards for points and cash back. As this can be a substantial amount some months, I believe it needs to have a line item in your monthly net worth as it is a liability at that snapshot in time. The HELOC is almost completely tax deductible (small smith maneuvre and downpayment on rental). Considering the tax deductibility of interest, our highest net interest rate on liabilities is 2.24%, with a weighted average rate of 1.79%.

Savings

TFSA’s have not been started yet as all spare cash has been going against the mortgage. Transferring the non-registered investments over would affect the tax deductibility of some of the HELOC.

Real Estate

Our primary residence was purchased in 2008 for $355K. We have put in $110K in DIY renovations since then in a complete overhaul. The house value shown here is based on those two numbers and is conservative relative to what similar homes in the area sell for.

Our ‘tear down’ is across the street and was purchased in 2014 for the lot, purchase price $375K. The next 2 years will be a mess with construction draw mortgages, HELOC balances for some construction costs, messy accounting for a rental that was effectively disposed of after 7 months of rent. We have no desire to remain landlords now or in the future.

Pension/Investments

My wife has a DB pension as a teacher. The balance shown is the termination benefit should she quit from her position tomorrow, net of any taxes. I have a matching RRSP plan through my work. Combined with CPP, we are not worried about retirement income, it’s just a matter of timing. We plan on contributing to my RRSP in order to get the full match but no more, then max out TFSA for investments, and then non-registered investments.

We have pretty substantial unused RRSP contribution room and will likely never use it. Perhaps in the event of a large capital gain, we may contribute some to offset the capital gain taxes. Not listed on the net worth values is our daughter’s RESP, which has a balance of about $4500. We plan on contributing enough every year to get the full CESG grant. The RESP is invested in TD e-series funds in a couch potato portfolio as a family plan.

Vehicles/Other

Just over half of this amount is vehicles. We have a two 2013 model year vehicles, one purchased new, one purchased used. I depreciate their value every month in net worth updates to keep it at just above wholesale value. The two vehicles combined cost us $250/mo in depreciation and repairs. I find that reasonable considering it would be hard to lease a single small vehicle for that price. The “Other” refers to fairly extensive photography equipment (part time business), sporting equipment and personal property

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FrugalTrader About the author: FrugalTrader is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 14 comments… add one }
  • Oslerscodes April 27, 2015, 3:14 pm

    Wanted to ask about your implementation of the “Smith maneuver”. Do you plan to continue this with the construction mortgage upcoming? Are you ahead – and by how much? Did you consider splitting your mortgage into segments – and using one segment as your investment loan where the predicted rate (for instance 5 year fixed rates at 2.5-2.7%) would be less than you’re HELOC rate (presumably prime +0.5% unless you used your engineer title at National Bank)? Recognize this last idea is not what Smith described but seems to offer more benefits (reduced cost of borrowing) than the classic readvanceable HELOC.

  • Tony April 27, 2015, 4:31 pm

    YTD Gain 41.9%? Is this a typo? by the way, good progress towards your goal:)

    • FrugalTrader FrugalTrader April 27, 2015, 5:36 pm

      That was a typo on my part. Off by a decimal. :) Fixed!

  • nobleea April 27, 2015, 4:51 pm

    Tony; Yes, that is a typo. Should be 4.19%.

    Oslerscodes; I do not plan on continuing the Smith Maneuvre during construction, or in the foreseeable future, period. I am still in the process of closing it up. I haven’t done the XIRR recently, but I would expect the whole experiment was pretty close to break even. I made some poor choices towards the end and the oil slump made things worse. An inexpensive learning lesson.

    • Landon T April 27, 2015, 6:27 pm

      Hi Nobleea, I was under the impression that one of the key parts of the Smith Maneuvre is that you have to be prepared to stick with it for the very long term in order for it to be effective. Have you decided that the hassle is not worth the potential gain? I’m considering implementing it myself so I’m interested in your perspective. I realize that it can be difficult and it’s by no means a slam dunk. But I decimated my savings to make my down payment and would like to get that money back in the market (with a very long outlook) by leveraging my house.

      Thank you.

      • nobleea April 27, 2015, 7:09 pm

        Yes, you have to be prepared to stick with it. And you have to have an investment plan, and you have to have the personality to deal with a debt balance that doesn’t shrink. Through this process, we’ve found that we’re not entirely keen on that last part. And I am not the best at sticking to an investment plan, especially when new funds arrive often. If I were to do it again, I would stick to ETFs which removes research, guessing, second guessing, etc and tethers you to the broader market.
        Unless you put more then 20% down, you will have a hard time extracting any of your downpayment money to put in the market. Perhaps if your home has gone up significantly in value, but that has to be taken with a grain of salt.

  • Dan @ Our Big Fat Wallet April 29, 2015, 4:04 pm

    @Nobleea I’m curious what the zoning restrictions are like for a separate dwelling? Here in Calgary there is an ongoing debate about legalizing basement suites to solve the housing affordability issue. Not sure what restrictions are like for an apartment above a detached garage but I’ve heard of them in other cities

    • nobleea April 30, 2015, 12:48 am

      Dan, a couple weeks ago the city here approved garage suites on any lot in the city. Prior to this they were only allowed on corner lots. There are still restrictions in terms of building height and most importantly size (~650sqft). I continue to be shocked that basement suites in Calgary are having such a tough time. It’s a no brainer that they should be allowed in any detached dwelling.

  • QCash April 30, 2015, 8:33 am

    Awesome job, nobleea! Allow yourself 6 months more than you plan for any construction project. And an additional 20% on top of any budget you have.

    • nobleea April 30, 2015, 12:34 pm

      Thanks QCash!
      I can see the schedule slipping a bit, but we’ve already estimated 13-14months, which is pretty generous in this market. City approvals are the big one, they’re not very prompt these days. The budget for the house we should be able to keep quite well – I’ve spent a lot of time going through all the subcontractor quotes and pricing and understand the construction process and materials well enough to know what we are getting. Where we could blow the budget is on landscaping, fences, irrigation, etc. But that’s all DIY stuff, so I can drag it out as long as I want.

  • FinanceNewbie April 30, 2015, 3:49 pm

    Great progress! We are in a pretty similar financial situation, though we are a couple of years older and have two little kids. Good luck with the building! We had our house built and it was a good experience overall, though there are a few things I would change now.

  • My Own Advisor May 5, 2015, 8:18 pm

    You’re doing very well!

    I am impressed with your Registered/Retirement Investment Accounts – great work. That amount should double every 7-8 years without any contributions but I suspect you’ll continue to contribute to them. :)

  • A May 27, 2015, 4:17 pm

    You mentioned about ~300k in investable assets right now. What do you consider investable assets?

    • nobleea May 28, 2015, 12:28 pm

      A, my definition includes cash, RRSP, non registered accounts, pension termination amounts. Doesn’t include non-vested restricted stock or RESP accounts. It’s closer to 265K, I rounded up. The value also includes the full market value of registered accounts and doesn’t factor in any taxes to withdraw or access.

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