12/24/2017

Thrifty Salaryman - December 2017 Net Worth Update

Since October and November, the market improved even more with the traditional Santa Claus rally in December. I’ve also increased my RSP e-Series index fund to a total of about $21K to take advantage of its lower management fee. My liability remained similar as my last update in November as a result of the holiday shopping season. Because of that, my next contribution to my investment probably will need to wait until I pay my credit card bill in mid-January. Everything is still within the interest-free grace period.

My current net worth is now $55,833.27, an increase of 11% from my November update of $50,227.24.


Cash $5,770.37

Investment $55,536.26:
$23,575.00 - Equity (Corporate Stock) - TD Direct Investing TFSA
$6,184.75 - Canadian Index Fund - RBC TFSA Mutual Fund Account - MER 0.72%
$21,193.45 - Canadian Bond Fund - TD e-Series RSP Mutual Fund Account - MER 0.50%
$3,078.80 - US Equity Index Fund - Employer Pension Plan - MER 0.15% + $55 account fee
$1,504.26 - Canada Equity Index Fund - Employer RRSP - MER 0.15%


Liability:
$5,473.38 - Credit Card Balance (Still within grace period)

12/22/2017

Canadian Median Family Net Worth - $295.1K

If you haven't notice, I spend a lot of my off time reading the news. Mostly CBC and Financial Post, it's a good way to stay updated on current events and market trends. I've recently read an article on CBC that talks about the median net worth of Canadian family in 2016. I figure I'll share this article, since we are using net worth as our main indicator of wealth.

Here is the Article

Bottom line, the median net worth for a Canadian Family is $295.1K. My latest net worth updates in December was $300,758.74. I am above the median, Awesome! If you are starting your own journey then hopefully this article will give you a quick benchmark to strive for. Happy Holiday!

12/16/2017

Neighbor Joe - Passive Income Update

Back in October, I posted my passive income breakdown as another method to track my wealth building progress.October Passive Income. Here is the updated spreadsheet, so now instead of receiving $1024/year I have increased my passive income to $1463/year.


In the past few months, I invested more into Enbridge since they were trading at a price that yields about a 5% return for dividends. I also did some rebalancing of my portfolio, I sold some of my Shopify Shares and invested into MasterCard. Next year I am going to try and double my passive income. Come back and check often to see how I go about doing it.

12/08/2017

Neighbour Joe - Books for new investor #2

A few months ago I wrote a post about books that I found beneficial for new and young investor like myself. Here is the link to that post. In it, I talked about three books that I have read which gave me some good insight on how to start building wealth. There is also a compiled list on the left-hand side under popular post.

Today I am going to talk about two new books that I have recently finished in which I found beneficial to my learning.
 

The Millionaire Next Door & The Millionaire Mind The first two book that I am going to discuss are written by a professor named Dr. Stanley. Dr. Stanley did a series of survey on people with net worth of over $1M in the early 90's and he observes that a lot of them possess similar character traits. If you only have time to read one book then just read the first one "The Millionaire Next Door". The second book is just an extension to the topic discussed in the first one.
What I want to share from the book was how wealthy people spend their money. Basically, the book said that most of the time you would not know someone is a millionaire base on the clothes, car or other materials they own. It basically means that they stereotypical wealthy personality you see on TV is not how real-life millionaire behaves. Most wealthy people work hard for their money so they are very mindful when spending it. If you don't believe me, just watch some video about Warren Buffet, Bill Gate, Mark Zuckerberg and Jeff Bezos, all these people drive relatively humble cars compared to their net worth. Bottom line is, if a person looks rich then they are most likely not that rich.
On the topics of cars, Dr. Stanley did a study and found that most millionaires own relatively cheap cars. Also, most of them don't really go shopping for a new car every few years unless needed. Key word in the last sentence is "needed", don't confuse that with "want", "desire" or other similar words. In his study, he even compares the more wealthy to the less wealthy and found that the less wealthy spend more money and shop more often for cars.
A story from the book about why wealthy people don't like spending much on cars is as follow. There was a CEO of a company that was well liked by his employee so they all got together to buy him an expensive car. His employee all thought that he will appreciate a luxury car since his current car is considered a poor man's car. This CEO appreciated the gesture but did not really like the car. His reasoning was that he really enjoys fishing and with such a luxury car he won't be able to go fishing with it. He'll also have to spend more money on maintenance and gas for this expensive car. What Dr. Stanley was trying to highlight from this story was the secondary and tertiary spending associated with an expensive item.
I'll use a similar example to explain my point, let say you just bought a brand new townhouse in Toronto for $500,000. Will you now go buy cheap $200 futon or a $2000 couch? Do you buy second-hand appliance or brand new appliance? It has been known in behavioral economics that consumer spends in relative term instead of absolute value. That means that people usually have a figure in mind for their budget relative to the purchase price of their house. So in this case, the fact that you spend $500,000 on a house means you will naturally spend more on appliance and furniture. Then now you'll need nice dish and cups to go with the new appliance and so on. Now your original spending of $500,000 has become much more then you anticipated. Most millionaires understand this concept and try to avoid the root causes of spending, which in this case is to spend less on a house.

Another interesting concept he discussed in his book was something called "income statement affluent" which is the opposite of another term he used, the "balance sheet affluent". The basic idea is that the income statement affluent are people that have a high income but save very little where the balance sheet affluent are very good savers. His argument was that income has very little influence if someone becomes wealthy or not. For someone to become wealthy you need to be good an offense(earnings) and defense(savings). Which means even if you earn a lot but you spend just as much then you'll never become truly wealthy because one day you'll stop earning.

12/03/2017

Neighbour Joe - December 2017 Net Worth



First off, I like to aplogize for skipping the month of November, I was away on a work trip and was not able to get good internet access for blogging. Regardless here is my update for the month of December. I'll also be updating my dividends tracker this month as well since I have make some change in my investment.


Asset 
Chequing: $772.51

Savings: $19.908.30
TFSA Investment: $52,040.78
TFSA Mutual Fund: $3,807.37(Invested in TD e-series index fund)
Real Estate: $224,000 (Purchase Price of my house)

Define Benefit Work Pension (Current Transfer Value): ~$153,000 (Last checked in Jul 2017,aprox $1000 a month of contribution)

*Automobile is not included (No monthly car payment)


Liabilities 

Mortgage: $147,229.02
LOC: $5,541.11

*Credit Card is paid in full every month
Current Net Worth: $300,758.74 (+0.8%)

11/05/2017

Thrifty Salaryman - November Net Worth Update

The market improved a bit in October and so as some of my investment in Index fund. Some of my stocks are not doing as good though. I’ve increase my RSP e-Series index fund investment to about $18.5K to take advantage of its lower management fee. My liability also increased due to a high number of annual expenses.


My current net worth is now $50,227.24, an increase of 13% from my September update.


Cash $4,921.29


Investment $50,568.86:
$22,631.45 - Equity (Corporate Stock) - TD Direct Investing TFSA
$5,521.31 - Canadian Index Fund - RBC TFSA Mutual Fund Account - MER 0.72%
$18,674.88 - Canadian Bond Fund - TD e-Series RSP Mutual Fund Account - MER 0.50%
$2,497.40 - US Equity Index Fund - Employer Pension Plan - MER 0.15%
$1,243.82 - Canada Equity Index Fund - Employer RRSP - MER 0.15%


Liability:

$5,262.91 - Credit Card Balance (Still within grace period)

10/17/2017

Neighbor Joe - Passive Income $1024/Year

On top of updating my monthly net worth, I am going to start tracking my annual passive income base on my current investment holdings. All my passive income currently comes from dividends. Currently, the market value of my investment is aprox $40,000 but my book value is around $30,000.


So here it is, I did up a quick excel spreadsheet with all the holding that pays dividends and calculated how much dividends I'll get every year. Right it's aprox. $1024 which translate to 3.4% of my total book value. Not all my investments are invested in a dividend paying stock so my return percentage is a little low.

If you are just starting on your journey I recommend you to start a tracker of your own. This will help motivate you to invest more as you see your passive income grows. Just by making this tracker I now know that I make an extra $1024 a year tax free. Although it might not seem like much at the moment, but that amount can almost pay for a small vacation every year. There you have it, here is my "make $1000 a year from sitting at home" scheme, which is probably more reliable then most "get rich quick by doing nothing" scheme. Invest and let your money work for you.

10/07/2017

Warren Buffett: "The Bet"

Soruce: https://www.cheatsheet.com

I recently read an article on the financial post which I found really interesting. The article is about Warren Buffet about to win a bet he made 10 years ago. The bet, "Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds, when performance is measured on a basis net of fees, costs and expenses." He pretty much challenged all active fund manager that the market itself without any managing will outperform any active managed fund. 

From a lot of book I have read about investing, this seems to be the common message. They all say paying big bucks to have "smart" people mange your money will never give you as good of a return if you just invested into the market. Even if a fund manager can out perform the market, the commission he pays to broker, the tax he pay for gains, and on top of the cost for his time will diminish his strong return. This is one thing I want to emphasis when people are looking to invested into actively managed mutual funds, most time they don't show the return after accounting for all their expenses. Let say a fund advertise a 10% return, it might only actually be a 7% return when you calculate all their fees. 

Anyway, my thoughts are as follow, either invest in a passive index fund that tracks a market index or manage your own portfolio. In one my earlier post I gave some advice on how to get started. Invest wisely, but remember, wealth building is a slow process. Slowly but surely you'll get wealthy.  

10/01/2017

Neighbour Joe - October 2017 Net Worth

Good day everyone, time for another monthly update. This month my only transaction is that I transferred $2000 into my investment account and invested into Hydro One. The reason I decided to invest into Hydro One is that they have recently purchased a US company and is looking to expand into the US market. Also their core business is power transmission which makes it a very stable investment since there will always be a requirement for power transmission. 


Asset 
Chequing: $4,832.05

Savings: $21,896.63
TFSA Investment: $40,516.61
TFSA Mutual Fund: $3,634.96 (Invested in TD e-series index fund)
Real Estate: $224,000 (Purchase Price of my house)

Define Benefit Work Pension (Current Transfer Value): ~$153,000 (Last checked in Jul 2017,aprox $1000 a month of contribution)

*Automobile is not included (No monthly car payment)
**Link to my investment portfolio as of 13 August 2017

Liabilities 

Mortgage: $149,785.57

*Credit Card is paid in full every month
Current Net Worth: $298,094.69 (+2.9%)

My portfolio performed well this monthly which is the reason for the increase in net worth. 

9/20/2017

Transferring into TD Direct Investing and reimbursing account transfer fee

Disclaimer: I don’t work for any financial institute. I am just sharing my experience.


This is post to walk through my experience of transferring an TFSA investment account with Questrade and combining it with a TD Direct Investing (TDDI) TFSA account. If you are not already a TD client, the process will be very similar except you’ll have to sign a few more paperwork to open a TD Direct Investing account.


When the Canadian government first introduced the TFSA, I opened a TFSA with TDDI but the fee back then was a hefty ~$29 per trade. If you do the math, the fee added up very quickly. As online brokerage became more and more popular over the years, I decided to give them a try and opened an account with Questrade for a low ~$5 per trade (back in around 2012). Their fees were alright for while until they started increasing them to effectively ~$10 per trade and introduced an inactivity fee of ~$25 per quarter if your balance is below $5K and don’t perform a trade. As the same time, TD caught up with the pack and decreased their fee to ~$10 per trade but also started charging an $25 quarterly fee if your balance is below $15K.


$5K balance was not a big amount to maintenance but ever since the drop in oil price (my holding in Questrade was oil heavy), my holding balance went below that threshold. As a result, I was left with two options: 1) increase my balance with Questrade so I don’t have to pay the quarterly fee or 2) transfer out. I don’t want to simplifying close the account because that means selling all the stocks, withdrawing the amount, and affect my TFSA contribution.


Both Questrade and TDDI have a comparable online trading interface but since I do majority of my banking with TD and they have a lot of retail location I can go to, I decided to transfer my Questrade account to TDDI and combine everything together.


Step 1: Call or go online and book an appointment with TD
I decided to call TDDI because I want to see if TD can cover the $150+tax account transfer fee Questrade will charge me when I transfer out. The agent on the other side of line told me that won’t be a problem so I booked an appointment with an advisor at a TD investment centre. You could book an appointment with any retail location but the advisors at their investment centre should have more knowledge in performing an account transfer.


Step 2: Ensure there are enough cash in your account to cover the fee
Ensure there are enough cash to cover the transfer fee in your transfer-out account. If you already have a TDDI account, you can just have enough cash to in your TDDI instead (this was my scenario, I only have ~$10 in my questrade account so they took money from my TDDI cash instead). If you don’t have enough cash, they will sell some of your stock.


Step 2: Bring all the necessary document to the appointment
If you are going to be a new TD client, bring the necessary document to open a TDDI account. For me, I just have to bring my TD client card. To perform the transfer, you’ll also need to bring the most recent investment account statement from the other investment broker. The statement need to have your account number, your name, and your holding/balance.


Step 3: Confirm with the advisor if the transfer fee will be reimbursed
I double checked with the advisor about reimbursing the account transfer out fee and he told  me it shouldn’t be a problem if the fee is less than $200.


Step 4: Sign the account transfer form
When I gave my account statement to the advisor, he asked me if I want the transfer to be “in-cash” (sell the stock and get cash) or “in-kind” (keep everything in stock). I decided to just do a “in-kind” stock transfer because I intend to keep holding them. I signed the transfer form afterward and done.


Step 5: Wait for the transfer and ask for reimbursement of the transfer fee
The transfer process can take upto 2 weeks according to my TD advisor but it only took 2 days in my case. After I saw everything in my TDDI account, I simply took a screenshot of the transfer-out fee that I got charged, e-mailed it to my TD advisor, and asked him to process a reimbursement. Within a day, he reimbursed that amount and now all of my holdings are with TDDI.

Bonus: By default, TDDI only deal in CAD. However, if you want to deal in USD, you can call them and set up a USD account over the phone so you won’t get caught in currency trade. You can also transfer-in stocks from other exchange, such as Europe or Asia, and sell them from your TD account. However, you can’t buy oversea stock directly from your TD account.

9/17/2017

Thrifty Salaryman - Mid-Sep Net Worth Update

The past few months has been busy but I finally got some time to write an update for this blog. A few thing happened from June until now: I opened a TD e-Series RSP account to take advantage of the low MER, invested into some e-Series index fund, and combined my Questrade investment account with TD Direct Investing.

My current net worth is now $44,489.54, an increase of 18% from my June update. The market has been very volatile this past few months and impact some of my investment negatively.

Cash $7,746.13:
$2,878.69 - TD Chequing
$109.59 ($89.86 USD) - TD USD Chequing
$3,198.29 - RBC Chequing
$1,431.55 ($1173.79 USD) - Bank of America USD Chequing
$128.01 - Cash - TD Direct Investing TFSA
$422.32 - PC Financial Saving

Investment $38,910.60:
$23,259.64 - Equity (Corporate Stock) - TD Direct Investing TFSA
$4,438.94 - Canadian Index Fund - RBC TFSA Mutual Fund Account - MER 0.72%
$8,886.13 - Canadian Bond Fund - TD e-Series RSP Mutual Fund Account - MER 0.50%
$1536.85 - US Equity Index Fund - Employer Pension Plan - MER 0.15%
$789.04 - Canada Equity Index Fund - Employer RRSP - MER 0.15%

Liability:

$2,589.51 - Credit Card Balance (Still within grace period)

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9/03/2017

Neighbour Joe - September 2017 Net Worth

Hi everyone, it's time for another monthly update of my net worth. This month I finalized the sale of my old house and got about $93,000 in cash. I immediately paid off my bridge loan, my line of credit, as well as put the maximum annual pre-payment amount into my mortgage ($26,880). I then invested about $1500 into MasterCard and put the remainder of the money into a savings account.  


Asset 
Chequing: $1,834.96

Savings: $21,890.73
TFSA Investment: $36,296.53
TFSA Mutual Fund: $3,532.67
Real Estate: $224,000 (Purchase Price of my new house)

Work Pension: ~$153,000 (I checked in Jul 2017 but I can't remember the exact amount)

*Automobile is not included 
**Link to my investment portfolio as of 13 August 2017

Liabilities 

Mortgage: $151,064.89

*Credit Card is paid in full every month
Current Net Worth: $289,490 (+1.4%)

The cash in my savings are only staying there till January 2018 where I will then put it into my mortgage. I have also recently doubled my mortgage payment and is now at $1,735.64 per months. As you can see my current strategy is to get my mortgage down as fast as possible to minimize my exposure to interest rate hike. If you have been following the news lately, there has been a lot of speculation that Bank of Canada will once again increase their interest rate. 


8/13/2017

My Investment Portfolio

As promised, here is my investment portfolio as of today.

As you can see I have made a few bad investment in my early days of investing. The last two stock in my portfolio were definitely not the smartest decision in my life. However they were all prior to my journey and I have personally learned a lot from making such bad investment decision. Most of the stock in my portfolio was only added this year. The majority of my portfolio is currently with a Canadian tech company call Shopify which has been super bullish since the beginning of the year. I am also invested into two Marijuana stock because I think once the legalization happens in Canada these company will get a huge boost in profits. My personal investment strategy right now is to buy and hold because I found that when I try to invest for short term gain I rarely turn a profit. I am also going to avoid energy stock and try to focus on sector that are less susceptible to global and political factor. I think stocks like Mastercard are excellent because for the foreseeable future the world will still be relying heavily on credits even if retail stores start moving online.

Anyway, I am not here to give advice or tips on which stock to invest into. This post is to give you a better idea of my investment so that when I do my monthly update you can see why the numbers are what they are. One last thing, my portfolio currently generates around $300 in passive income annually.

8/01/2017

Neighbour Joe - August 2017 Net Worth

Hi everyone, it's time for another monthly update of my net worth. A lot happened this month, I moved to a new province for work which meant I brought a new house and sold my old house. The transaction haven't fully settle yet so I am going to give an approximate amount.  


Asset 
Chequing: $4,149.85
TFSA Investment: $31,165.04
TFSA Mutual Fund: $3,525.77
Real Estate: $224,000 (Purchase Price of my new house)

Work Pension: ~$153,000 (I checked in Jul 2017 but I can't remember the exact amount)
Approximate cash from house sales(Sales price - old mortgage) : ~$91,000

*Automobile is not included as I feel it depreciate too fast and will give a misrepresentation of my true net worth

Liabilities 

Old Mortgage: $0
New Mortgage: $179,200
LOC: $12,066.71

Bridge Loan: $30,000

*Credit Card is not included as it is paid in full every month
Current Net Worth: $285,574.66 (+5%)

A reason for the increase in net worth is my investment which is doing better than last month because Bombardier stock price went up recently. I still haven't contributed any additional money to my investment since this blog started. I am planning to make a post later to show everyone my investment portfolio.

The main reason my net worth went up is because my wife took $10,000 from her saving for the down payment of the new house. Since her net worth is not part of my calculation, this transfer reflected in an increase in my net worth.

One last thing, as you can see i'll have a lot of cash on hand soon. My plan is to paid off all the loan and as much of the mortgage as I can without incurring any penalty. I'll then set aside the max amount for mortgage pre-payment for the new calendar year. Then whatever is left will be invested in my TFSA. 

7/11/2017

TFSA - Trading vs Investing? Taxable?

I recently came across an article on the Financial Post. Article. The article was talking about how frequently buying or selling stock in your TFSA can make your prone to an audit by CRA. Apparently, if you use your TFSA for any "business" use, all your income in your TFSA can become taxable. I am not going to go into too much details as it is well explained in the articles. I just wanted to point out the article to everyone so that you don't find yourself in such situation. However, if you follow our philosophy of slowly but wealthy where you buy and hold then you'll be just fine. Keep saving, investing and wealth growing. Cheers.

7/03/2017

Bank of Canada Interest Rate Hike? What does it mean for you?


I am not sure if you have been following the news lately by there has been a lot of speculation that the Bank of Canada will raise its overnight interest rate. Here is a CBC article if you want to read into the background: Article. Ever since the US increased their interest rate, there has been a lot of speculation on when Canada will follow. 

What this all mean for the average Canadian like yourself? Well interest rate it is used to determine the prime rate which is how much it cost to borrow money. If you were the one lending money then it's how much you should charge for your money. It's kind of like the MSRP when you go buy a car from a dealer, but for borrowing money. Google definition of prime rate: "the lowest rate of interest at which money may be borrowed commercially." 

The biggest impact is the one area where people burrow the most money, their mortgage. 

Mortgage
Lets examine the impact of this on mortgage and your monthly payment. So from doing some simple google search, I was able to find this chart on ratehub.ca. It compares Bank of Canada's overnight interest rate with the prime mortgage rate. One thing that I want to point out is that not all banks has the same mortgage prime rate, TD is currently at 2.85% while RBC is at 2.72%. Regardless, the speculation is that BoC will increase its overnight rate from the current 0.5% to 0.75%. We can assume that mortgage rate will go up by about 0.25% as well, it might not be exact but it'll be a good estimation. Let's compare what a 0.25% difference will do to a $200,000 mortgage.
It's about $25 more in monthly payment which equates to $1000 more of interest in two years and less money going towards principal. Even thought $25 might not seem like a lot, the expectation is that the rate will continue to go up. My advice is bring your debt down as much as you can while the rate is still relatively low. Pretend that the rate is 0.25% higher and put that extra money towards your monthly payment. I mean eventually you'll have to pay it, might as well do it now.

Consumer Debt
The secondary impact are other debts, such as line of credits and credit cards. Basically, if you are in debt then an increase in interest rate is bad news for you. In David Chilton's book "The Wealthy Barber Returns", he suggested that when the interest rate is low, it's best to pay down your debt. This way when the interest rate goes back up, you wont have to pay as much since your debt is much lower. Even thought his book was one of the best seller, Canadian still owes $1.74 for every dollar in income, guess not a lot of peoples are taking his advice. The fact is, as interest rate goes up, your debt will grow as well if you are not able to take control of it. Interest are usually compounded monthly for credits and it can really get out of control fast.

Neighbour Joe - July 2017 Net Worth


First off, Happy Canada Day, its the 150 birthday for Canada this year.Well here is my update for July 2017. Here was what my net worth was last month.

Asset 
Chequing: $5,121.62
TFSA Investment: $29,885.99
TFSA Mutual Fund: $3,558.30
Real Estate: $255,000

Work Pension: ~$153,000 (I checked but I can't remember the exact amount)
*Automobile is not included as I feel it depreciate too fast and will give a misrepresentation of my true net worth

Liabilities 
Mortgage: $162,573.98
LOC: $12,282.32

*Credit Card is not included as it is paid in full every month

Last Month Net Worth 
$108,870.94
Current Net Worth: $271,709.61 (+150%)

WOW! Yes my net worth got a huge boost this month, but in reality all that happened was that I figured out what my pension is worth currently. This month there will be a lot of money moving around as I am in the process of selling my current house, buying a new house and moving to a new province. This is the reason that there is a chunk of cash sitting in my chequing, I need cash for down payment for my new house. Anyway, i'll be very busy this coming month, but I will make a post this month about the potential increase in interest rate. 

6/11/2017

Foreign Exchange - XE Trade vs CanadianForex

Just a few hours ago I decided to exchange some money in my USD account with Bank of America into my TD CAD account. I could do it the old fashion way of driving across the border, withdraw my money, bring it back to Canada, then exchange it at the bank or one of those currency exchange booth. However, this will not save me on gas and exchange commission fee so I decided to go with the online method.

There are two popular foreign exchange firms that I am aware of in Canada: CanadianForex and XE Trade. I’ve never used them for personal transaction but I’ve used XE Trade many times back when I still run my small business.

I’ve never used CanadianForex before so I decide to check it out and signed up for a free account. I wanted to transfer $1k USD (still keeping a few hundreds in my BoA account for my next US trip) to CAD so I get an instant online quote from them and compared it with XE Trade.

CanadianForex: $1000 USD = $1317.70 CAD
XE Trade: $1000 USD = $1325.03 CAD (I get more CAD)

As you can see, it’s very obvious who the winner is for this transaction but I do know the rate will get more competitive at higher amount.


My suggestion: sign-up an account with both firm, get a free quote from them by running the process all the way to the end but without confirming the trade (so you’ll see all the commission fee, etc.). By doing that, you’ll be able to compare between the firms and save forex commission. Majority of the time, their rate is much better than the big bank rate of 2.5%+ commission.

Thrifty Salaryman - June Net Worth Update

A lot of money shuffling happened in the month of May and early June. Previously in May, I have around $15k in cash and saving. After doing a bit of planning, I’ve now reallocated the money into several form of investment. Below is a breakdown of my net worth of $37,565.85 (+22.5% from May) as of June 10. I still have around $5k in cash that I need to reallocate into a form of investment to gain some return from it. Some of it is currently in US dollar which I'll need to exchange them back to CAD using a low fee foreign exchange account such as XE or Canadian Forex.

I am moving more and more of my investment into index fund and ETF for the lower fee (pay yourself first). The RBC Canadian Index Fund is not the greatest option due to its 0.72% MER, I still want to keep my RBC banking account as a result of my small business banking account with them. TD bank e-Series is by far the best Index Fund to have due to it’s low MER. If you can purchase ETFs, go for something like the Vanguard Index ETF.

At my current investment allocation, I am very heavy on equity and majority of it is on corporate stock. This is due to some investment I made a few years ago on the Oil and Gas sector which haven’t recovered yet. My goal, however, is to re-balance my portfolio to have a higher percentage in Index Fund or ETF instead of directly in corporate stock to lower my risk once Oil and Gas recover a bit.

If I can maintain my saving pattern and achieve a rate of return around 7% annually in the long term, I should be on-track in achieving financial freedom within 15 years.

Cash $5,894.12:
$932.42 - TD Chequing
$121.00 ($89.86 USD) - TD Chequing
$2,668.79 - RBC Chequing
$1,580.57 ($1173.79 USD) - Bank of America Chequing
$69.86 - Cash - TD Direct Investing TFSA (will go into an eSeries Index fund after I transfer some more money into the account.
$421.48 - PC Financial Saving

Investment $32,162.73:
$18,531.29 - Equity (Corporate Stock) - TD Direct Investing TFSA
$5,110.00 - Equity (Corporate Stock) - Questrade TFSA
$4,489.35 - Fixed Income (Bond ETF) - TD Direct Investing TFSA - MER 0.13%
$3,074.29 - Canadian Index Fund - RBC TFSA Mutual Fund Account - MER 0.72%
$638.47 - US Equity Index Fund - Employer Pension Plan - MER 0.15%
$319.33 - Canada Equity Index Fund - Employer RRSP - MER 0.15%

Liability:
~$500 - Credit Card Balance (Still within grace period)

Summary of Investment Allocation:
$23,641.29 (73.51%) - Direct Equity (Corporate Stock)
$3,393.62 (10.55%) - Canadian Equity Index - MER 0.67%
$638.47 (1.99%) - US Equity Index - MER 0.15%
$4,489.35 (13.96%) - Canadian Bond ETF - MER 0.13%

6/01/2017

Neighbour Joe - June 2017 Net Worth

Here is my monthly update for June 2017. For those that are new here, I recently started my journey to financial freedom and I am using this blog as a way to track my progress. Here was my net worth last month. This month was very eventful, my son was born at the beginning of the month. I've been busy learning how to be a dad so didn't spend much time on my personal finance. I am also in the process of relocating for work, so hopefully by next month I'll be able to sell my current house.

Asset 
Chequing: $776.65
TFSA Investment: $29,852.41
TFSA Mutual Fund: $3,630.83
Real Estate: $250,000

*Automobile is not included as I feel it depreciate too fast and will give a misrepresentation of my true net worth

Liabilities 
Mortgage: $163,042.62
LOC: $12,076.33

*Credit Card is not included as it is paid in full every month

Last Month Net Worth
: $104,343.24 
Current Net Worth: $108,870.94 (+4%)

My Net Worth went up mostly because of my investment. Currently, about 50% of my investment portfolio is invested into (TSX:SHOP) which had a strong earning report at the beginning of the month. I wasn't able to figure out the current worth of my pension this month. I will try to find out this month and update you guys next month.

5/25/2017

TFSA vs RRSP



Hello everyone, today I am going to write about Tax Free Savings Account (TFSA) vs Registered Retirement Savings Plan. A lot of people I've spoken to knows about the two products but don't truly understand the difference between them. To start off, the ultimate aim of these products is to promote you to save money by giving you tax incentive.

TFSA
So what is TFSA? It is a special type of account that was introduced in 2009 that allow people to put money aside and any gain(interest, dividends, capital gains, etc) in that account are tax free. There is a limit to how much you can contribute every year but if you have unused contribution room then you can carry it to next year. If you were 18+ in 2009 and you just decided to open a TFSA today you'll get all the contribution room for the past 8 years.

The name is kind of misleading since it doesn't have to be a "savings" account. It can be a mutual fund account or an investment account.  I am going to use myself as an example, I have a TFSA Mutual Fund Account and a TFSA Direct Investment Account. When I invest into the stock market in my investment accounts the quarterly or monthly dividends I get are not taxed as an incomes when I withdraw it. Remember, you don't have to put it in a savings account.

RRSP
RRSP has been around for a long time, but the concept is similar to TFSA. You can have RRSP Mutual Fund or RRSP Direct Investment. The difference is when you contribute to your RRSP that amount gets deducted from your income when you file your tax. Let say you make $50,000 annually and you contribute $2000 to your RRSP then you only get tax as if you were making $48,000. When you file your tax return you'll get some money back if tax was deducted from the $2000. Some HR department will not deducted the tax from your pay if you let them know ahead of time so you don't have to wait for CRA to give you your money back. However, when you withdraw from your RRSP it'll be taxed as income.

TFSA vs RRSP
Most of my understanding of the two is by reading the CRA website as well as a book call "The Wealthy Barber Returns". The book by David Chillton, he was on Dragons Den for a few seasons, have a whole chapter on this very topic. He breaks it down in details the difference between the two and concluded that they are very similar so it's really a personal choice. Have a read if you get a chance, the book also provides other useful financial information.

  1. Tax - The difference is when do you want to be tax. You'll either pay your normal income tax and take your after tax earning to contribute to your TFSA. Or, you can take your pre-tax earning, contribute to your RRSP and get tax when you take the money out. The key thing to consider is what your tax bracket is right now compare to your tax bracket will be when you retire. 
  2. Flexibility - TFSA is by far way more flexible than RRSP since you can take money our of your TFSA anytime like a normal savings account. RRSP is usually more complicated because of the tax implication during withdrawn.
  3. Contribution - In most cases TFSA has a lower contribution limit than RRSP. TFSA currently has a contribution limit of $5,500 per year plus any unused contribution room from previous years. They also inflation index contribution limit from previous years. RRSP has a contribution limit of 18% of your last years income on your tax return to a maximum of $26,010. Therefore you can actually save more money with RRSP.
One big thing I want to point out for TFSA is the potential for a substantial amount of tax free income. Let say you continue investing the maximum amount every year for 20 year in your TFSA you can easily grow it to a substantial amount. Then all passive income from your investment in your TFSA are now tax free for life. In comparison, any money coming out of an RRSP will be taxed as income. My personal recommendation is to contribute into your TFSA first before RRSP unless your company matches your RRSP contribution. I personally don't have a RRSP since I contribute to a define benefit pension plan with the government. Hope this post helped and if you have any comments feel free to put it in the comment section.

Resource - Here are links to the CRA website for both product.

TFSA - http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html

RRSP - http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/rrsps-eng.html