Million Dollar Journey

Building Wealth through Saving and Investing

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Net Worth Update November 2012 (+1.04%)



Welcome to the Million Dollar Journey November 2012 Net Worth Update.  For those of you new to Million Dollar Journey, a monthly net worth update is typically posted near the end of the month (or beginning of the next) to track the progress of my journey to one million in net worth, hopefully by the time I’m 35 years old (end of 2014).  If you would like to follow my journey, you can get my updates sent directly to your email or you can sign up for the Money Tips Newsletter..

In the last update, I mentioned the possibility of a Santa Claus rally in the stock market.  Of course, as soon as I mentioned it, the TSX corrected about 5% but has since recovered to about a 2% loss for the month of November.  The S&P500 performed a bit better and broke even for the month.  As my portfolios grow larger with more positions, it’s no surprise that they are acting similar to the index.  My leveraged portfolio is composed of Canadian dividend stocks, and it is slightly down for the month but has outperformed the TSX.  On the other hand, my RRSP consists mostly of large cap US stocks and has slightly outperformed the S&P500.

As mentioned in the October update, a few stocks that I have been watching have started to move which were traded in my “risky” trading account.  A couple of these trades paid off which include a solar energy stock along with a social media company.  The remaining of the “non-registered account” growth is due to savings for the month.  The savings growth is primarily driven by income growth.  The nights and weekends working on a new aspect of the business are starting to pay off.  While we went through significant lifestyle inflation (new house and new baby) a few years ago, we have come into a routine which means that extra income goes to savings.

Before I go, for the deal hunters out there – until Sunday Dec 2, 2012, Chapters is offering 15% off purchases $75+ using the code HOLIDAYCHEER. Might be a good time to pick up a deal on Christmas gifts.

On to the numbers:

Assets: $772,600 (+0.94%)

  • Cash: $4,500 (+0.00%)
  • Savings: $20,000 (+0.00%)
  • Registered/Retirement Investment Accounts (RRSP): $132,200(+0.15%)
  • Tax Free Savings Accounts (TFSA):  $40,900 (-0.24%)
  • Defined Benefit Pension: $40,700 (+0.74%)
  • Non-Registered Investment Accounts: $129,000 (+5.74%)
  • Smith Manoeuvre Investment Account: $104,800 (-0.19%)
  • Principal Residence: $300,500 (+0.00%) ( purchase price adjusted for inflation annually)

Liabilities$94,100 (+0.21%)

Total Net Worth: ~$678,500 (+1.04%)

  • Started 2012 with Net Worth: $585,228
  • Year to Date Gain/Loss: +15.94%

In my last update, readers suggested to chart my net worth progress over time.  Below are the net worth values since Dec 2006 with data points taken semi annually.

Some quick notes and explanations to net worth questions I get often:

The Cash

The $4,500 cash are held in chequing accounts to meet the minimum balance so that we pay no fees (accounting for regular bill payments – ie. our credit card bill). Yes, we do hold no fee accounts also, but I find value in having an account with a full service bank as the relationship with a banker has proven useful.

Savings

Our savings accounts are held with PC Financial and ING Direct. We usually hold a fair bit of cash in case “something” comes up. The “something” can be anything that requires cash such as an investment opportunity that requires quick cash or maybe an emergency car/home repair.  We also need cash to cover any future tax liabilities.

Where Does the Savings Come From?

We don’t live a lavish lifestyle (how we save money) and do not carry any bad debt.  The only debt we have is an investment loan (which pays for itself), so we end up pocketing a majority of our earnings.  Our earnings come from salaries, private business income (via dividends to shareholders), and eligible dividends from publicly traded companies.

Real Estate

Our real estate holdings consist of a primary residence and REITs plus a rental property. The value of the principal residence remains valued at the purchase price (+inflation) despite significant appreciation in the local real estate market.

Pension

The pension amount listed above is the value of both of our defined benefit pension plans.  I basically take the semi annual statement and add the contribution amounts (not including employer matching) on a monthly basis.  The commuted value of the pensions are not included in the statements as they are difficult to estimate.

Stock Broker Accounts

Another common question is which discount broker do I use?   We actually have accounts with multiple institutions.  I’m hoping to reduce the number of accounts that we hold in the near future.  Here is a review of some of the more popular online stock brokers.





12 Comments, Comment or Ping

  1. 1. Vincent

    Excellent work! Your site has inspired me to track my own net worth.

    Do you find as your net worth grows, the percentage change per month (usually increasing) decreases? I’m tracking mine now and the increase seems higher probably due to monthly savings are higher as a percentage of my net worth. But I assume as net worth increases and your savings stay the same, you are more vulnerable to portfolio changes?

  2. 2. Danielle

    Interesting update! I am new to this site and find the content intriguing. Quick question for the website owner, is your net worth entirely yours or do you have a spouse/partner you live with? I noticed the large majority of the asset side is on the house, do you plan to sell it in the future? What are your plans when you hit $1M? Do you think anything will change in your life? Do you think it will give you happiness to reach $1M given that money can’t buy happiness?

    Also, since the house is most of the assets side, will you be able to live off your earnings and stop working once you hit $1M?

  3. @Danielle,

    Thanks for stopping by. The net worth is family net worth. With regards to the house, it is big enough for a family of four, but you never know what may happen, so it is possible that we may upgrade. Having said that, yes it is a large asset but it’s mortgage free, so not having a mortgage payment frees up cash flow – you gotta live somewhere right?

    Great question about reaching the $1M mark, for me, it’s more of a milestone in a longer journey rather than an endpoint. I mean, really, is $670k net worth really that different than $1M net worth in terms of “happiness”? The real goal is to have investment assets large enough so that their distributions can pay for our family monthly expenses – which is quite a ways out. So, no, we will not live off our $1M in net worth when we get there.. but $2M in net worth is another story. :)

  4. @Vincent, thanks for the feedback. Yes, as the net worth gets larger, savings is becoming a smaller part of the growth. Same for the investments, as the portfolios become larger, market volatility will impact net worth growth.

  5. 5. Sarlock

    Yeah, I’ve been thinking that… as you get closer to your goal, the market is going to decide whether you reach it by the end of 2014 or not more than your savings rate. Good luck either way :-)

  6. 6. The Reverend

    Congrats again FT on the positive progress.

    I have a question along the same line as Vincent. I’m a few years younger than you (and a few hundred thousand behind in net worth) but I’ve been tracking long enough to get a sense of how much net worth growth contribution I get from various sources.

    Basically:
    – savings grow at a fairly constant $ amount
    – real estate (principal residence) is growing at inflation as well
    – rest of net worth is registered and unregistered investments that grow primarily with market movements (and any contributions).

    If I project out my net worth, I need to achieve roughly 25% year over year growth to hit my goals. This was easy when savings were a big chunk of the growth but as the investment portfolio grows, it is becoming a large portion of the net worth and I don’t expect markets to grow at that rate on a long term basis.

    Makes me reconsider my goal. Do you periodically forecast to see what the variable components of your growth (ie market returns) would need to look like to reach your goals?

  7. 7. FT

    @The Reverend, Very good point, when growth remains relatively linear, it’s pretty difficult to grow once assets become larger. For me, i’m working my tail off to grow the business, which means increased income which converts to increased savings. In addition to growing income, i’m growing the capital value of the company (not recorded on the net worth statement).

    Another good idea about calculating what’s required in market returns to reach my goal. That’s a challenging one for me as my savings etc is not linear where I have some good months and bad months. That is a nature of the beast with regards to business income.

  8. Awesome work as always!

    Mark

  9. 9. Vincent

    @ The Reverend

    I personally project my future net worth by using some basic assumptions to see when/if I will reach my goal or just to see how much I may have at retirement. Currently I am exceeding my monthly goals but savings are attributing to a larger percentage to that growth as opposed to my investments so it’s a tad concerning that either my investments are not doing as well or my assumptions are too high.

    My million def wont come soon since I am single household income right now.

  10. 10. Paris

    Excellent work FT. You are doing awesome! Keep up the great momentum. All the best to you and your young family.

    @Danielle. Good questions on what life will be like when you hit $1M goal. We reached our $1M goal this year in August. Went from $0 and minus net worth after my husband lost his small business and we had a baby on the way to $1M in 10 years. It can be done. Our financial mentor couple did it. They started in their 40′s at being bankrupt with 5 kids and were millionaires by 50 years old. We started in our early 30′s with 1 kid and were able to achieve same goal. We are 43 years old.

    Life has many surprises along the way, but if you set your goal and actively pursue it, its amazing how it eventually works out. I thought life would change alot, bands playing, fireworks, etc etc.. but you know what, life went on as per usual after we hit the goal. People did not treat us differently, nor were they awed by our accomplishment. I thought we had to be “more fancy” and that it would be expected of us being “millionaires” and all. But it wasn’t. I thought when we got to the goal I was going to shout it from the rooftops… but we didn’t. In a way you became more careful of who you shared your news with. I just told my close friends that we finally achieved our “financial goal” and never told them that it was $1M in net worth. The goal is a personal number to each individual / family / couple.

    Best piece of advise we received from our older friends and mentors was to keep on being yourself. Treat people with honor, respect and kindness. We also thank God everyday for his blessing on our family. Our mentor couple friends recommended that you treat people who have not that much in this world and people who have way more than they know what to do with… the same. Be sincere and genuine. You do not have to turn into a snob when you become a millionaire. Stay humble and kind. Help out others where you can… and this does not have to be just money donations… it can be by volunteering or donating items you no longer need (like kids clothes to a single mom or struggling family’s kids).

    I still buy my kid’s clothes at Value Village on 50% Off Day. My kid has great clothes and lots of them because you sure can get lots when kid’s jeans cost $3 a piece. We have a beautiful house that is tastefully furnished yet alot of the extra’s were given to us by the older couple who sold us this house as they were downsizing. Another blessing for sure. They even sold us their used luxury car which totally matches the house at a great price that is 1/5 the price of buying this same luxury car brand new. We are the 3rd owners of the car but it runs great.

    In the back of our minds, its a comfort to know there is a financial cushion in place for our family’s security. I may shop at Value Village but we did vacation in 2 x 5 star resorts this year to celebrate reaching our $1M Milestone.

    We are now working towards our $2M goal and challenging ourselves to see if we can get there in another 10 years or less. Being on the flip side, we wanted to encourage you all and let you know it can be done when you put your mind to it. May not turn out exactly like you envision it to be, but life has a way of putting opportunity in your path when you are prepared and are paying attention. All the very best to all the folks on their Million Dollar Journey.

  11. 11. Gen

    I have been reading this blog for a few years and today I decided to calculate our Net Worth. I have a question regarding the Pension Plan. I have a federal government pension and my statement shows three values and I’m not sure which one I should use. The first is the annual income I would get at age 60. The second is the annual income I would get at 50 or before. The last is the value of my pension should I transfer it. Which one should I use? Thanks!

  12. 12. Ed Rempel

    Hi Gen,

    If you are planning to quit your job and commute your pension before age 55 (like FT), then use the value if you transfer it. Otherwise, use zero.

    If you collect the income, then your pension is future income, like your salary in future years – not an asset. You cannot actually access the money.

    Ed

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