10/02/2019

Neighbour Joe - October 2019 Net Worth


Here is my net worth for October 2019. Last month I put some money into my TFSA and invested into Canopy Growth (TSX: WEED) as well as TD Bank (TSX: TD). The market was doing well in September but as soon as we entered October it has been on a decline. Hope you are enjoying the fall weather. 

Asset
Chequing: $650.41
Savings: $610.53
TFSA Investment: $98,826.87(Market Value)
RESP: $2,804.00 (Market Value)
Real Estate: $224,000 (Purchase Price of my house)

Real Estate Rental Property: $200,000 (Purchase Price of the house)
Define Benefit Work Pension (Transfer Value): ~$153,000 (Last checked in Jul 2017)

*Automobile is not included (No monthly car payment)

Liabilities
Mortgage: $119,554.40

Rental Mortgage: $195,914.90

*Credit Card is paid in full every month

Last Net Worth Update: $363,756.24
Current Net Worth: $364,930.51 (+0.32%)

Passive Income
TFSA Passive Income: $3,574.64/Year or $297.89/Month (TFSA only, RESP and rental property not included)

9/18/2019

How setup a low cost RESP?


Hello, today I'll be writing about RESP and how you can open and manage your own RESP to avoid paying a hefty management fee. First off, for those that don't know what RESP is, it stands for Register Education Saving Plans. Like the name suggests, it helps with parents saving for their kid's education fund. There are two big benefits to this plan, the first is that the gains are not taxed if the money is used for education. The second benefit is the Canada Education Savings Grant (CESG), which is the government's contribution to the RESP. The government will contribute a maximum of $600 into the RESP depending on your income and contribution.

For more information with regards to CESG, you can find it on the CRA website. Here is the link: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/registered-education-savings-plans-resps/canada-education-savings-programs-cesp/canada-education-savings-grant-cesg.html  

There is also a lifetime contribution limits of $50,000, again I'll suggest you check out the CRA website for all the information.

Opening an RESP
Well, first of all, you must be a parent to open an RESP. Sorry, if you are just planning to become a parent, the government won't let you plan that far ahead. Once your child is born then you can go to any organization that can sell investment or securities and open an RESP account. I myself opened an RESP Direct Investing account through my bank, similar to what I did for my TFSA. A lot of people think that just because it's an RESP you have to go through some education mutual fund company. However, you can buy individual stocks, ETF or index fund within an RESP account. Banks will never tell you that option because they'll want to sell you one of their mutual fund for your RESP, therefore you'll have to specifically ask for a direct investment account.

Why do you want to do this? Because this way you can invest in a low-cost index fund for your RESP instead of a high-cost mutual fund. One of the RESP funds I saw had an annual management fee of 3% compared that to an index fund where the management fee is around 0.05-0.5%.

Managing your RESP
There isn't much management to be done, once you have an account open, set up for an automatic monthly contribution of $210, this will max out the government's contribution. Then you can go in every month to buy a low-cost index fund, mine is currently invested with the TD e-series Index funds. Then in a few months time, you'll see the government's contribution automatically being put into your account. I usually spend 5 minutes a month managing the RESP, so it is completely doable for any parents.

Watch it Grow
Then now you can sit back and watch your child and the RESP grow for the next 18 years.


9/16/2019

Tips to reduce monthly expenses!


Here are some cost-saving tips that I have learned over the years. My post about my monthly budget also talked about a few cost-saving tips that my wife and I use.
  1. Utilities Cost Doesn't matter if you rent or own a house you'll still need to pay for utilities. Depending on where you are living the price of utilities vary drastically (i.e Ontario vs Alberta). The thing about utilities is that the less you use the less you paid. A very obvious statement that a lot of people fail to use to their advantage. Here are a few things that usually cost you the most but are easy to cut back on:
    1. Heating - Setting your house to a high temperature so that you can wear a T-Shirt around the house in the winter is a very costly habit. A few degrees less can save you big time over the span of winter.
    2. Shower - Taking a long shower does two things, uses water and uses electricity or gas to heat up the water. Just remember that it is not just the water you are using but also the boiler for the hot water.
    3. Dishwasher - Dishwasher is the same as shower, it uses hot water for washing then electricity for drying the dishes. Set your dishwasher for air dry if possible, it'll take a little longer to dry but will use less electricity.
  2. Auto Insurance A very simple cost-saving measure is to increase your deductible on your insurance. This means that if you ever decide to claim insurance you'll have to pay more out of pocket for your repairs. If you think about it, most people don't claim insurance for the minor incident and when you require major repairs the cost will be much higher than your deductible. Also, remember your insurance policy gets taxed so having a more expensive plan means paying more tax. Increase your deductible, pay less tax and save the difference. 
  3. Internet/Cables You don't need the fastest internet available unless you have a lot of people living with you. The cheapest plan is often enough for all your internet needs such as Netflix or gaming. If you need more then upgrade to a better plan after. As for TV, I realize that a lot of on-demand option such as Netflix or Sports TV subscription will still end up being much cheaper than a cable package.
  4. Repair > Replace When something breaks in your house you can either repair it or replace it. Sadly a lot of people opt for the latter and end up spending way more than they need to. I remember when my refrigerator broke my first instinct was to get a new one to replace it. After some research on Google, I was able to diagnosis the problem and end up buying a replacement part for $70. If you try to replace things when they break then you will spending a lot of money.
I'll share more saving tips whenever I discover them myself. Feel free to comment if you have any saving tips that you'll like to share.

9/09/2019

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.

9/01/2019

Neighbour Joe - September 2019 Net Worth


Here is my net worth for September 2019.

Asset
Chequing: $2,009.60
Savings: $2,010.53
TFSA Investment: $96,040.11(Market Value)
RESP: $2,804.00 (Market Value)
Real Estate: $224,000 (Purchase Price of my house)

Real Estate Rental Property: $200,000 (Purchase Price of the house)
*Define Benefit Work Pension (Transfer Value): ~$153,000 (Last checked in Jul 2017,aprox $1000 a month of contribution)

*Have not been updated since the start of this blog.
**Automobile is not included (No monthly car payment)

Liabilities
Mortgage: $119,864

Rental Mortgage: $196,235

*Credit Card is paid in full every month

Last Net Worth Update: $359,147.97
Current Net Worth: $363,765.24 (+1.29%)

Passive Income
TFSA Passive Income: $3,365.42/Year or $280.45/Month (TFSA only, RESP and rental property not included)

8/12/2019

Neighbour Joe - Return on Assets

Photo by Austin Distel on Unsplash

Hello everyone, today I am going to be calculating a popular ratio used by security analysts when evaluating a company, on my personal finance. The return on assets (ROA) ratio is a quick measurement to show how well the company generate income from its assets. You take the net income and divided by the total assets. My assets were all layout in my latest net worth update post. Let us begin:

Total Assets - $522,845 (As of August 2019)

For the total assets, I did not include my define benefit pension because it will make this calculation very complicated. I contribute to it monthly, but it'll be tough to find out exactly how much monthly income the portfolio is currently generating.

Income (As of August 2019)

TFSA Investment - $3267.33/Year
RESP Investment - $51/Year

Rental Income - $8,880/Year
Rental Expense
Insurance - $588/Year
Property Tax - $1,504/Year
Mortgage Interest - $7,172/Year

Net: $2,934.33

For income, I am strictly focusing on passive income, since employment income is generated by me, and I did not include myself in the total assets.

ROA Ratio: 0.56%

Insights
Not a bad ratio, since TD Bank's latest ROA, is at 0.88%. Anyway, one thing I learned from going through this calculation is that my rental property is actually not generating income for me right now. That's the price you pay for doing 100% debt financing on the house. I am about $300 in the red right now, but it won't stay that way for long, the rent increases every year, and the interest expense decreases every year. In a year time, I should be breaking even and into the positive.

Hopefully, as I continue on this journey, I'll be able to make better use of my assets and start increasing my return on assets ratio.



8/03/2019

Neighbour Joe - August 2019 Net Worth


Here is the net worth update for August 2019. The market is very volatile this year, which has caused my net worth to fluctuated quite drastically on month by month basis. Overall, my monthly employment income is still the most significant contributor to my net worth increase. I have also started tracking my rental property in my net worth. I've had the property for a year now but never got around to putting it into my spreadsheet. The rental property is a partnership between my parents and me. They didn't have the income to qualify for a mortgage, so I took on the debt while they put down the equity. Cost and profit are shared accordingly.

Asset
Chequing: $1,498.38
Savings: $1,210.48
TFSA Investment: $93,360.57(Market Value)
RESP: $2,776.01 (Market Value)
*Real Estate: $224,000 (Purchase Price of my house)

NEW*Real Estate Rental Property: $200,000 (Purchase Price of the house)
*Define Benefit Work Pension (Transfer Value): ~$153,000 (Last checked in Jul 2017,aprox $1000 a month of contribution)

*These have not been updated since the start of this blog.
**Automobile is not included (No monthly car payment)

Liabilities
Mortgage: $120,769.98

NEW Rental Mortgage: $196,533.81

*Credit Card is paid in full every month

Last Net Worth Update: $355,996.77
Current Net Worth: $359,147.97 (+0.89%)

Passive Income
Current Passive Income: $3,267.33/Year or $272.28/Month (TFSA only, RESP and rental property not included)


7/01/2019

Neighbour Joe - July 2019 Net Worth



Happy Canada Day! Here is the net worth update for July 2019.

Asset
Chequing: $2,228.21
Savings: $2,705.30
TFSA Investment: $92,569.79(Market Value)
RESP: $2,263.41 (Market Value)
*Real Estate: $224,000 (Purchase Price of my house)
*Define Benefit Work Pension (Transfer Value): ~$153,000 (Last checked in Jul 2017,aprox $1000 a month of contribution)

*These have not been updated since the start of this blog.
**Automobile is not included (No monthly car payment)

Liabilities
Mortgage: $120,769.98

*Credit Card is paid in full every month

Last Net Worth Update: $353,583.24
Current Net Worth: $355,996.77 (+0.68%)

Passive Income
Current Passive Income: $3,213.81/Year or $267.82/Month

6/19/2019

Beginner's Guide to Mortgage



Hi, today I am going to talk about mortgage and things to consider when getting a new mortgage. Since my near term goal is to pay off my mortgage within three years, I figure it only makes sense to do a post about mortgage. OK, so what is a mortgage? It's a fancy term for a loan to allow you to buy a house, meaning you are borrowing money. Mortgage is a big business and banks love them. Let's just think about this, when you get a mortgage, you pretty much are sharing ownership of the house with the bank since they, in theory, are buying the house for you. In return you pay interest and you assume almost all the risk for that property. There is a reason why you must have home insurance on your home or else the bank will not give you the loan. If you stop paying your monthly payments then the bank will come and evict you from the house, this is known as foreclosure. Intro asides, let us get into the process of getting a mortgage.

6/06/2019

Must read personal finance books!

The question a lot of people, myself included, ask when they start their journey is, what are the must read personal finance books. Reading has been an essential part of my journey, and I will highly advice anyone trying to reach financial independent to try and read a book a month. Here is a list of books that I've personally read and will recommend for people that want to learn more about personal finance.