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Sept 2009 Net Worth Update (+2.78%) – Pension Buy Back Edition

Welcome to the Million Dollar Journey Sept 2009 Net Worth Update – The Pension Buy Back Edition.

As I’ve mentioned in passing before, my wife has a defined benefit pension plan that she contributes to through her work with the government.  As she was on maternity leave last year, her work recently gave her the opportunity to “buy back” her pension.  Buying back her pension allows her to retire “on schedule” instead of delaying it a year due to her leave.  Since it’s pretty typical for us to have cash on hand, we decided to pay lump sum instead of pay roll deduction (+interest) which you may notice in the balance sheet below.

The markets continue to march higher which is pushing my portfolio to higher highs.  Good in a way, but it may be a false sense of security.  Some are predicting a “W” shaped recovery which could mean the testing of March lows.  Other economists are saying that this is a “V” shaped recovery with more upward energy left.  I don’t know where markets are going, but I do know that I’m not buying many equities at this level as most securities are expensive.

Assets: $$465,900.00 (+1.87%)

  • Cash: $4,500 (+0.00%)
  • Savings: $13,500.00 (+3.85%)
  • Registered/Retirement Investment Account: $72,200.00 (+4.64%)
  • Pension: $27,500.00 (+21.41%)
  • Non-Registered Investment Account: $17,200.00 (+1.18%)
  • Smith Manoeuvre Investment Account: $50,000.00 (+2.67%)
  • Principal Residence: $275,000 (+0.00%) (purchase price)
  • Vehicles: $6,000 (2 vehicles) (-20.00%)

Liabilities: $86,900.00 (-1.92%)

  • Tax Liability: $3,000 (-0.00%)
  • Principal Residence Mortgage (readvanceable): $30,700.00 (-5.54%)
  • HELOC balance: $53,200 (+0.19%)

Total Net Worth: ~$379,000.00(+2.78%)

  • Started 2009 with Net Worth: $309,950.00
  • Year to Date Gain/Loss: +22.28%

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). 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 can prove 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.

Real Estate

Our real estate holdings consist of a primary residence plus a rental property. The value of the principal residence remains valued at the purchase price despite significant appreciation in the real estate market that we’re in.  I will most likely be adjusting the value of the home come the new year.

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FT About the author: FT 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.

{ 21 comments… add one }
  • canucktuary September 30, 2009, 11:14 am

    Frugal,
    I noticed a typo:

    Started 2008 with Net Worth: $309,950.00

    I think should read:

    Started 2009 with Net Worth: $309,950.00

    Don’t sell yourself short :)

  • Ben September 30, 2009, 11:15 am

    You’re having a monster year!

    There is a small recurring typo in your summary – should read “Started 2009 with…”

    Cheers,
    Ben

  • Ben September 30, 2009, 11:17 am

    Well, what do you know. 9 months go by and nobody makes a peep, and then 2 birds chirp up within 1 minute of each other.

    What are the odds of that?!

  • Adam September 30, 2009, 12:40 pm

    Congrats, I also noticed the ‘started 2008’ line immediately, not sure why it jumped out this time.

    I really need to work on this whole dual income scenario. ;)

  • FT FrugalTrader September 30, 2009, 6:47 pm

    Thanks for the heads up guys, will fix the typo.

  • Sam Li September 30, 2009, 8:36 pm

    Way to go Jason!

  • FT FrugalTrader September 30, 2009, 8:49 pm

    Who’s Jason? :)

  • David@DINKSFinance September 30, 2009, 10:48 pm

    Congratulations on the positive year! Smart move buying back the pension. Could get expensive quick if you have many more kids though!

  • Sam Li September 30, 2009, 11:30 pm

    Sorry, my bad. I’m reading “Frugal Dad” as well, Jason White the author. Congratulations on the progress.

  • Sarlock October 1, 2009, 12:29 am

    Nice work so far this year!

    I’d keep the real estate valued as it is… it’s better to be overly conservative with that sort of valuation. And besides, if you boost it up, it’ll raise your net worth significantly and you don’t want that… you want to keep the carrot where it is so that you keep working hard to organically raise it to that $1 million target… and if we have a real estate crash (which I believe is coming) then you won’t have to dial it back again.

  • Forex Hacked Review October 1, 2009, 2:37 am

    I agree with Sarlock.

    Congrats on the big year.

  • canucktuary October 1, 2009, 11:52 am

    That’s too funny Ben :)

    Congrats again FT! You’re on track for a 29% net worth increase this year.

  • aerosmith October 1, 2009, 2:22 pm

    just wondering what the tax liability is and how do you calculate it? Thanks for the update.

  • FT FrugalTrader October 1, 2009, 3:53 pm

    aerosmith, my tax liability is from the sale of a rental property earlier this year.

  • aerosmith October 1, 2009, 4:46 pm

    thanks for the clarification. One question though related to tax. As of today you have some RRSP invsetments. Do you consider the entire RRSP investment amount towards your net or the after tax net amount (since you are not yet benefiting form the RRSP) of the investment. Like you may have $1000 in your RRSP today but if you withdrew the investment today you’ll only get back (1000-marginal tax). Isn’t this amount your real net worth?

  • Stan October 1, 2009, 9:01 pm

    FT, I’m intrigued as to why you are paying a lump sum on the service buyback. I believe government employers (at least the federal ones) allow you to buy back your pension over an amount of time equivalent to twice your leave (i.e., two years for a one-year mat leave) without any fees or interest. Even though we could afford to pay off our parental leaves right away, we decided to spread them over two years, since it’s essentially a free instalment plan. Maybe your wife’s employer doesn’t offer the same advantage.

  • FT FrugalTrader October 1, 2009, 11:50 pm

    Hey Stan, as you mentioned, we decided to pay lump sum because 1. they were charging interest if we were to pay in installments, and 2. because we had cash on hand. Which province do you work for?

  • Credit Card Chaser October 2, 2009, 2:55 am

    I would agree with you on your desire to always have cash on hand in case something comes up. While many people have heard of the 3-6 months living expenses rule for setting aside money as an emergency fund it is also great that you mentioned that having liquid funds available to invest if something great comes up is not something to discount. Keep it up!

  • Ms Save Money October 2, 2009, 8:14 pm

    If you continue to see your investments going high it’s an indication it’s going to drop – or at least for the most part everyone has experience this.

  • used tires October 3, 2009, 7:46 pm

    Pretty cool looking at a real world budget example, I am a finance student in my third 3rd year as you know, so I am constantly looking at corporation’s balance sheets in my corporate finance course. =D

    Till then,

    Jean

  • Financial Samurai October 14, 2009, 2:30 pm

    There’s been significant real estate appreciation in your part of the country? Please tell us where! Maybe I should invest!

    I’m impressed that your property has gone up in the biggest financial meltdown in our lifetimes.

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