Nov-30-2017 Report

Here comes our third net worth update report!

We’ve come a long way since 2011 to build what we have today. If you read the about me page, I mentioned that we started off with a net worth of -$91,000 in the fall of 2011 but made progress to reach $710,138 today. This number can fluctuate at any given time, so we’re not focused on hitting a million. Instead, we’re trying to learn as much as we can on our financial journey. Most importantly, we want to have fun while doing it.

After spending more time reading personal finance books and blogs, we started tracking our net worth more closely at the end of last year. So, to give you an overall picture of our progress, you can see our summary below.

 

Our progress since Dec 31, 2016:

Date  Net Worth  Change
Dec-16  $  554,936.00 N/A
Jan-17  $  571,038.00  $  16,102.00
Feb-17  $  581,622.00  $  10,584.00
Mar-17  $  585,263.00  $    3,641.00
Apr-17  $  601,095.00  $  15,832.00
May-17  $  614,576.00  $  13,481.00
Jun-17  $  624,705.00  $  10,129.00
Jul-17  $  630,320.00  $    5,615.00
Aug-17  $  654,409.00  $  24,089.00
Sep-17  $  665,167.00  $  10,758.00
Oct-17  $  691,188.00  $  26,021.00
Nov-17  $  710,138.00  $  18,950.00

 

And I’m not kidding when I say reading and learning about personal finance improved our finances significantly! So, I want to thank all the personal finance bloggers, authors, and contributors for making a positive impact!

To see how we did this, you can read about my “no spend challenge” post and the things I learned. This was a major contributor to our net worth result, thanks to books and blogs!

To help you further with your financial goals, I’ll also be writing in my future posts how we developed a disciplined approach to savings, earnings, and investing. Again, we made a lot of mistakes with our money in the past, and I won’t be surprised if we’re still making mistakes. However, the most important thing is learning from those mistakes.

Moving on, let’s break down the sections to see how we did this month.

In my post “Here’s 15 Financial Goals – What’s Your Score?”, I mentioned that we don’t keep a strict budget on our spending. But it looks like we’ll have to start tracking this because when we were updating this report, we had no idea why or how our net worth got to this point. Despite it going down or up, it’s nice to see how much was impacted by our spending.

With that said, I’m going to add a credit card section that will track most of our spending in our next month’s report. Again, we purchase everything with credit cards (whenever we can) to reap the rewards. And I say “whenever we can” because some places don’t accept credit cards. In those cases, we’ll have to use cash and track on the side.

Anyway, here’s a snapshot of how we did!

 

Let’s take a look at our assets.

 

Cash: $36,882

We’re up from $32,067 to $36,882, a $4,816 increase. This number includes our paychecks and the rent check. It also subtracts our home mortgage, expenses, as well as our monthly investment purchases of $2,300 in our TFSAs and RRSPs.

 

TFSA (Tax-free savings account): $120,005

Overall, our accounts increased by $4,166 (3.60% increase) for the month. Both the monthly contribution, as well as the markets, played a role.

 

RRSP (Registered Retirement Savings Plan) Investments: $81,939

Our RRSP investment accounts increased by $2,284. Like our other investment accounts, we see a less increase compared to last month. But remember, October was a pretty bullish month!

One thing we want to mention here is we exclude our company’s pension in our net worth calculation. We only record our self-directed RRSP investment accounts.

 

Non-registered Investments: $69,354

These are our holdings in USD. We haven’t made any contributions to this account since late 2013.

This account increased by $5,239 last month. For this month, our account increased by $3,038. So, not as crazy as the previous month. But we’re still happy to see our investments work harder than us though these increases aren’t very realistic. Anything can happen at any time, so we’re prepared to see it fall should the markets head south. But either way, we’ll be ignoring the noise because we’re focused on the very long-term.

 

Company Stock Ownership: $55,437

Nothing much to say here, other than the fact it went up by $2,351 (a 4.43% increase). And who can say no to some free money? 🙂

 

Real estate: $1,060,000

As mentioned in the previous reports, for both the primary residence and the investment property, we decided to fix the values at $750,000 and $310,000, respectively. Despite the professional’s appraisal of $805,000 and $320,000, respectively, we decided to assign a lower value to be a little conservative. After all, we might see Canada’s (especially Toronto’s) housing market fall… *shrugs* 🤷‍♀️

Not that we care ’cause we ain’t selling these anytime soon. And for the most part, we’re hoping our tenants can continue to cover our expenses so that it gives us room to save more of our paychecks.

 

Investment Property Account: $9,597

We have a joint account and every activity associated with the investment property (not our primary residence) is tracked here. That is, all income and expenses run on its own on this account.

The account this month is down by $920 compared to last month. To be honest, I’m not sure what happened here, but I suspect it’s the timing of payments (rent, mortgage, HELOC interest, etc). We would have to take a closer look. As landlords, we need to be on top of this stuff, but we haven’t been and I admit we seriously need to improve here!

It should be noted that six months worth of property tax has already been paid upfront with this account.

 

In sum, our assets went up from $1,417,480 to 1,433,215, an increase of $18,108 (1.11%) for the month.

 

 

Now let’s take a look at that debt!

 

Student loan: $20,465

This will be the same story from all of our previous report haha.

Since 2010 (him) and 2011 (me), we decided to invest instead of paying off our loans. Overall, we were lucky and it worked out in our favor due to a bull market after the 2008 crisis.

But honestly, with Canada’s two recent rate hikes (and more to come), we’ve been making plans to kill off our student loans soon.

 

After reading Damn Millennial’s post “3 Reasons You Should Pay Off Your Debt Before Investing”, I felt more motivated to do it even sooner. I actually sent a text message to my fiance immediately after reading this and asked him “Yo……… can we… like… just pay off our student loans within the next few weeks??”

His response was: “If you believe markets will fall, deleverage. If you believe markets will go up, then leverage. Hard to say.”

Like, NO $HIT, Sherlock! (my joking tone of voice to my finance). But I’ll convince him that we should just kill $20,000 of student debt by the end of this year, or early next year (Jan 2018)! I’m held accountable now that I wrote it down here!

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Anyway, as for now, our outstanding balance reduced from $21,070 to $20,465. As a result, our combined student loans reduced by $605 for the month.

Primary resident: $391,792

The outstanding mortgage went from $392,956 to 391,792. As a result, $1,164 went towards home equity thanks to our tenants (the ones who live in our separate unit)!

 

Investment property: $245,342

The mortgage reduced from $245,724 to $245,342.09, with $382 going towards our equity.

 

Revolving Home Equity Line of Credit (HELOC): $65,477

Instead of buying boats and cars, we wanted to use HELOC to invest. So, we decided to take the leap with an investment property.

For about three years, we were testing the waters with our primary residence to see how it feels to be landlords. As a result, we were getting comfortable and wanted to learn more, so we decided to give it a shot with a second property. But, there’s a lot to learn since we’re still new at this!

With that said, we tapped into this line to pay for the down payment.

Also, if we use this borrowed money to invest (i.e. real estate, stocks, funds), the interest on HELOC is deductible. As long as the investments generate income (i.e. dividends and/or interest), we can deduct this interest from our income.

Now, I know that most of you will bash us here because, at the end of the day, debt is debt. And I totally understand and respect different views. But my fiance and I plan to hold this property forever (unless circumstances change) hoping it will become an income generator for us when we retire.

We’re hoping the tenants will build equity for us, along with generating some positive cash flow. Aside from the hopes of building net worth, we’re in it for the experience as well.

For over a year, we’ve done thorough research and analysis, along with some serious stress tests, before making the decision to buy. Of course, nothing is risk-free, but we are willing to take the risk given our situation.

We won’t know the outcome for now. Worse comes to worst, we’ll take the hit, lose money, and move on. That’s the risk of being in any business. Overall, we agreed with each other that we will admit to any investment mistakes and learn from it.

 

Anyway, our total liabilities went down from $726,292 to $723,077, reducing our overall debt by $3,215.

 

In summary, our net worth went up from $691,188 to $710,138 for the month, an increase of $18,950.