Posted by Tim Stobbs on June 30, 2011
Long term readers might remember that my June updates typically suck. This one isn’t much different.
Wife’s RRSP $19,900
Wife’s Investment Account $12,400
Wife’s TFSA $8,900
My Investment Account $6,200
High Interest Savings Account $1,400
Net Worth $424,600 (+$3,700 or +0.9%) [+ 10.7% YTD ]
Investment Net Worth $134,500 (-$5400 or -3.8%) [+ 6.0% YTD]
Mortgage is down by $24,600 or 63% of my goal for 2011.
June typically isn’t a good month for a net worth update since I have several large bills due around this time. As such I usually see about $5000 leave savings to cover off property tax and house insurance. I could balance off the savings during the year with a balance owing, but that seems like over kill for one crappy update a year. Also the hit to the equity markets nicely reduced my investment net worth even further.
The good news in all of this mess of numbers is the mortgage keeps dropping nicely. Actually I checked as of today I could stop lump sum payments and my mortgage would still be paid off by the end of my current term in spring 2014. So at least there is some good news in all of this.
Oh, one last thing. Someone had previously asked how can I do these updates without my files being up to date in a previous post. The answer is I don’t use my files at all for these values, I pull all of them directly from each website so the values are as up to date as I can get them.
Posted by Tim Stobbs on June 29, 2011
It’s officially summer here now with the forecast high finally into the 30+ range right before the July long weekend. So now a lot of people start heading out to their cottages/cabins more often and their guests start to think: I could get used to this and vacation property lust starts to kick in.
Despite the initial reaction to the contrary I do get vacation property lust myself once in a while. My parents have had a cabin now for about a decade so I’ve been very familiar with the lifestyle and even I have to admit there is something about the place that is just relaxing to be at.
Yet what is is really like to own a second property? Well to be honest from what I’ve seen it is a bit of pain in the ass if you already have a house to look after. Maintaining two sets of yards sucks when you have a short summer already, you will likely have a little trouble remembering what is in each fridge, you will wash a lot of sheets if you have guests, and you can bet your insurance bill just got a lot higher with another property. Yet is it worth it?
The answer strangely enough can be: yes. You just have to accept up front that a second property will not be an investment, but rather a decision purely based on what makes you happy. Just don’t have any delusions about the decision being a financially smart one. Unless you have a huge annual vacation budget already and are willing to give up almost all other travel, you are likely not to break even. Also your ongoing costs will likely be substantial so your retirement plans will also likely take a setback if you choose to have that vacation property.
Yet a second property doesn’t have to be so bad with a little careful planning. I’m familiar with one family that recent got a little lot in a wooded valley just 15 minutes from their house. The yard does not have a lawn to maintain and it is just big enough to have a trailer on the site. So their total investment is a mere $60 to $80K to have a place they can visit every single weekend in the summer if they want. It is somewhat of an odd setup, but it does keep their costs down and keeps in mind the big issue of having a cottage is making sure it is close so you use it.
So if you really want that vacation property, go ahead and look at your options. I would caution that you should interview several existing vacation property owners prior to buying to make sure you know what you are getting into. Do you have a cottage or cabin? If so, it it worth it? If not, do you want one?
Posted by Dave on June 28, 2011
This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any. Dave is from Ontario and is working towards his CGA certification.
Rather than taking a detour, I stupidly got stuck in a traffic jam from 11:30 p.m. to 1:30 a.m. on the way home from a visit with friends and a trip to Toronto (401 Westbound if anyone is interested). While I was moving approximately 100 meters every 10 minutes I had a lot of time to think (my wife was sleeping for much of the time) and realized that my wife and I have basically “booked” up every weekend of our summer, pretty much until after Labour Day.
We’ve tried to limit our plans to be able to spend some time at home, but once summer starts it just seems like a waste to stay at home when there is so much stuff to do and the nice weather only lasts for so long. We are constantly getting home on a Sunday afternoon, dumping everything out of the car, running to the grocery store to fill our empty fridge, doing some laundry and packing the car back up to go somewhere else 5 days later.
Most of our weekends involve just visiting family and friends, but there are a few that will be somewhat expensive – a weekend in Toronto going to see a comic (Adam Carolla) and a Toronto Blue Jays game, visiting 2 Ribfests around the province (ribs are our favourite food and we will travel to eat them ), as well as my continuing golf habit that I just can’t seem to give up.
So, how do we afford to do this amount of stuff, when we’re knocking down our mortgage as quickly as possible? Over the past few years, we have figured out what our average spending is over the summer and treat it like any other expense – we save for it over the first half of the year. Basically, from January to July, we save up a bunch of money to spend over the summer period that (hopefully) will match everything we want to do. We continue to save the same amount in this same “fund” and use it in December to pay for Christmas and birthdays.
I really don’t see us slowing down at all over the next few years. I think if we did, we would probably get more of our list of things to do done around the house, but we realize we would rather be jumping off a dock into a lake up in the Muskokas, diving into waves in Sauble Beach, or enjoying a few $10 beers at a Jays game then we would patching and painting drywall (one of the things right at the top of our summer to-do list).
We have chosen to spend our time and money having fun, we have a plan to ensure it doesn’t get in the way of our long-term financial goals by looking up to a year ahead and figuring out how much we will need to be able to afford to do what we want and essentially hibernating in the winter to get there (neither of us are winter people).
Do you have a financial plan for summer? How do you balance the “fun stuff” with your long-term financial goals?