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Wednesday, March 29, 2017

Net Worth – June 2012

Posted by Tim Stobbs on July 4, 2012

The following is a update on Tim’s plan to retire early.  The current metric to tracking this goal is my net worth.  This will be the last year for these posts, since once the mortgage is paid off it will cease to be useful.  At that point future updates will shift to investment net worth only in 2013.

Assets

House $377,000
RRSP $28,500
LIRA $11,200
TFSA $16,900
Pension $49,500
Wife’s RRSP $28,700
Wife’s Investment Account $12,500
Wife’s TFSA $10,800
My Investment Account $6,000
High Interest Savings Account $0

Total Assets $ 541,600

Debt
Mortgage $18,100
HELOC $500

Total Debt $18,600

Net Worth $523,000 (+$13,700 or +2.7%) [+ 10.5% YTD ]
Investment Net Worth $164,100 (-$2000 or -1.2%) [+9.8% YTD]

Perhaps one of the most frustrating things that can occur is a series of events that results in your plan not moving much of anywhere.  This month’s update is like that.

I did everything I should  and I still didn’t get much for progress.  Actually in the case of the investments those fell by more than I contributed, so I lost ground. *sigh*  Is it bad to wish Greece would default already so that the markets could perhaps move on to something else?

Then of course the summer is when my property taxes are due so that always cleans out the high interest savings account.  Overall this was a crappy month with a single bright spot of my houses values went up a bit, but that is meaningless to my retirement plan (since I don’t count on doing anything with my house other than paying it off).

So in the end, I’m going to have a beer and enjoy my summer and forget this update ever occurred.  Some days you just have to accept and move on or in my case pay off the mortgage by Oct.

Any questions?

(Click image to see larger version)

Comments

13 Responses to “Net Worth – June 2012”
  1. Rob says:

    Just one Tim. You may have been asked this before, and sorry it was, but, the pension amount, is that cash value, or have you figured out a value based on what it will give you down the line?

    Just curious. As an Ex-government employee I receive a small pension for life, however, I never put it in my net worth.

    Do you, or anyone else for that matter think I should, and how would I calculate its worth?

  2. greg says:

    How do you feel about such a large amount of net worth being tied up in one very illiquid asset? Knowing what you know now about your situation, would you have preferred a smaller/cheaper house? Why/why not?

  3. SavingMentor says:

    Those frustrating months are always out there, but it still looks like you are doing very well indeed. I don’t think I’ll be obtaining that level of net worth for quite some time.

  4. Jon_snow says:

    I would not count on very many increases in your house value going forward. I doubt things are going to get as ugly as they did in the states, but our RE downturn is coming. Considering how much your net worth is due to your house value, you are really going to have to SAVE AND INVEST YOUR BUTT OFF to make retirement happen at 45. My home value (300k, nearly paid off) will be added to my ER fund since I will be ER’ing to my island acreage.

  5. Jacq says:

    Here’s the thing – you might get a lot of flak on the investing focus. Things will go up and down and it’s so not like the guaranteed return of a mortgage payoff. Plus people get kind of weird over their chosen investment strategies where the mortgage payoff people are quite mild. Oh well, should be interesting commentary.

    Jon – Tim’s only mid 30’s so has 10 years left to go with an end amount of say $750k. I think that’s totally do-able unless we have another 2008-9 decimation that isn’t played well. If he plays it well, he could be over and out at 40.

  6. Jon_snow says:

    Over and out at 40? When his ER fund currently sits at just over 160k? With a couple of kids no less?

    And an entire topic could started as to whether 750k is enough to fund an extreme early retirement… Big inheritance down the road maybe? I’ve bought and read Tim’s book and know about his frugal ways… but still…

  7. Rob says:

    @Jon_snow: I love nay-sayers. I keep reminding people of this all the time. There are people out there who would be happy with a lot less than what Tim is planning to have.

    And yes, you could start a topic on whether or not $750k is enough. But it wouldn’t do anyone any good. Those who aren’t able to get their head wrapped around the concept, just won’t get it. And,its hard to have a constructive discussion when people are frustrated from lack of understanding.

    It always ends up with the; I’m not willing to…; or I wouldn’t…; or My wife/husband couldn’t…; or some other excuse that restricts a person from happily adopting a lifestyle that is easily supported by less money.

    If it works for Tim and his family, then all the power to them. Personally, $750k would be overkill for my wife and I. We would be happy at around $500k, and the ability to bring in a little extra once every couple of years for something extravagant.

  8. Tim Stobbs says:

    @Rob – The pension is defined contribution, so that current cash value that I post. As to how to calculate a DB pension, mmm, good one, you could do an estimate based on the cash flow to create a capital number, but if is a small amount I won’t worry about it. You can always just reduce your spending by that amount and run your retirement numbers that way.

    @Greg – Oh, I’m fine with most of my net worth being tied up with my house. Saskatchewan is on a boom cycle so the investment in paying off the mortgage is saving me a fortune on rent. I do plan on downsizing when the kids are older (the house is larger than I need, but it is used for the daycare currently), but I don’t plan on any cash on that sale or reduction in my bills in my retirement plan. So I can take the hit if I need to on this place. After all I only paid $190,000 for the place so I can take a massive drop in price and still get what I put in out.

    @SavingMentor – Thanks, it always helps to take the long view when these months come along.

    @Jon_snow – Oh, I agree that the house value might even fall in the future. I just don’t care since I will be focused fully on the investment net worth at that point(as mentioned above I only need the house to provide shelter, I don’t plan to cash it out). I know that there is a LOT of saving ahead, but I’ll also have a HUGE cash flow to do it. My saving rate will jump to almost 75% after the house is paid off. At that rate even market returns won’t have much of an affect in the short term on my savings. Cash flow generation post FI is a much different story.

    @Jacq/Jon_snow – Out by 40…I ran an option on that. It is doable but I would have to accept earning at least $7,000 a year until 65. Overall you can leave anytime you want, you just have to figure out how much working for income you could tolerate each year (see Dave’s post from last week). I personally don’t know the answer to that yet myself, so I’m planning for full FI, but could settle for semi-retirement if needed or I get so frustrated with work I bail for a while. It really does come down to choice…what do you want more today freedom or most spending cash?

    Good questions/discussion folks.

    Tim

  9. Jacq says:

    A question – as an engineer you should be able to pick up short term work very easily down the road that would be quite lucrative – if you wanted to. Have you ever considered that option?

    Dave’s post didn’t seem realistic (overly conservative) to me at the $ amounts & # of hours he was talking about (for an accountant or engineer). They seemed like minimum wage levels of income for someone with a professional designation/occupation and that just doesn’t happen.

    I think of earning what comes from a 3 month project (that always go longer) every once in awhile when something interesting comes along. There’s no way that would be as low as $7-10k/year or it might not be worth getting out of bed for. Unless it was very interesting or something you believed in like a non-profit.

  10. Tim Stobbs says:

    Jacq,

    Yep, I’ve considered the consulting route as I have previously work at a consulting firm. There are a few complications with that I would have to register for a different type of engineering lience which I’m not too sure of the costs/requirements. I’m also a little unsure of ‘short term’ work since the vast majority of engineering projects I’ve been involved with are along the lines of 1 or 2 years not three months. There might be some of a smaller scope, but just not in my previous consulting experience.

    The money is isanely good. Given my background I could likely charge out at ~$130/hour. Even given expenses and taxes I could cover my $7000/year requirement for the full 25 years in like two years of full time work. Which brings me back to my orginal issue…do I just work full time for a few more years and hit full FI.

    I would like the idea of shorter term contracts more fequently, but I’m not sure where I could get those.

    Tim

  11. Jacq says:

    Yeah, I know what you mean about the difficulty of finding shorter term work – and it’s even harder to find regular work like that (that you can count on every year). I have friends that are a couple though that do this peripatetic kind of work – he’s an engineer, she’s an accountant and they have dual US/Cdn citizenship. They’re in the process right now of renting out their house here in Calgary and moving down to the Bay area with their kids. They’re planning on both looking for work and whoever finds the best job will be the one working – for as long as they’re there.

    I think the shorter-term jobs are out there in most occupations, they’re just not as common and often come through word of mouth/connections. But even if you did something like put in a year – across tax years – like July 1-June 30, you’d only have to work every 3-4 years to pull in a decent salary with low(er) taxes.

    Having said that, accounting is better for this m.o. because of year-ends and tax seasons vs. engineering work.

    If I were you, I’d be working contract jobs right now since you have the stability of a stash and low expenses. So many of my former co-workers who are engineers at EPC’s have traveled and lived so many places (some tax free) and had such great experiences. Maybe that’s something to look forward to when your kids are grown if you’re into that.

  12. Ihatetaxes says:

    Hmmm, My wife and I have zero debt after paying our mortgage off last year and a net worth of just over $1.5M as of July 1st. We are early 40’s and plan on retiring at 50 (her) and 55 (me) in 13 years with net worth of about $3.5M. We have two young kids who will be at home for the next 15 years or so. We are adding over $100k per year to our self directed investment porfolio and should have annual combined income in retirement of $100k without reducing the principal. This income combined with realistic spending and no debt will allow a good amount of travel and spending on things we enjoy like good food and wine and a nice car replaced every 5-6 years or so.

  13. retireincomfort says:

    I agree with Ihatetaxes. We are the approx same age(42 and 45) and our kids are a few years older. We plan on retiring with a net worth of 3.5M in 2-3 years and we feel that it will allow us the money required to travel and live a comfortable life. I don’t know how we would be able to do it on any less than that amount.

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