Jan 2015 – Net Worth

The following is an update of Tim’s plan to retire early in 39 more months.  Please note we are mortgage free.

Our ultimate goal between investments and the home equity is a net worth of around $1 million.  The investment part of that target is $600,000 (or higher).

Investments

Account (Contribution), [+/- Gain or Loss less contributions]

RRSP $41,220 ($0), [+$1880]
LIRA $14,860 ($0), [+$170]
TFSA $54,840 ($3000), [+$4500]
Pension $117,690 ($3956), [+$3594]
Wife’s RRSP $72,760 ($0), [+$3520]
Wife’s TFSA $46,660 ($5,500), [-$1570]
High Interest Savings Account $2320 (-$4150),[+$0]

Investment Net Worth $350,350 ($8306), [+$12,093 or +3.4%]

(YTD Contribution: $8,306), [YTD Gain: $12,093 or +3.4%]

Home Equity

Estimate $400,000

Spending

Last Month $1054

Honestly the only odd things we really spent much on was $33 in ebooks and about $50 taking my sons to a hockey game.  Otherwise a slow spending month.

Trailing Last 12 Month Average $2521 (or $30,254 for the last 12 months)

Results

PF Score: 24.8 {Target 32}

Net Worth ~$750,350

Commentary:

Well you might have noticed at the start of this post I now have a new long term target: $600,000 in investments. I’m not too particular about the house equity going up or down by a fair margin so while the million net worth would be nice I’m not going to panic if we are short of it.

To meet this goal I need to average $5000 in contributions per month or $60,000 per year.  This will be a step up from our usual savings, but should be doable due to several things:

  • Our base savings is around $50,000 per year.  So we are short around $10,000.
  • I just got a raise which should cover about $2000/year.
  • The new income splitting tax credit should give us an extra $2000/year.
  • We paid off our car in Dec 2014 entirely and so that cash flow should give us another $6000/year to finish up the missing amount.

Part of my compensation from work involves a lump sum contribution to my pension at the start of the year, hence the noticeable jump in that account’s value.  The other oddity was I moved that money stuff into savings back in December and we put it into my wife’s TFSA.

Investment performance was a bit nuts this month with a just over $12,000 gain for the month. Ya! Nice way to start off the year.

Any questions?

Jan 2015 Investment Net Worth

(click to make bigger)

Book Review: How to Be Free

I came across a reference to Tom Hodgkinson’s How to Be Free recently and of course based on the title I knew I wanted to read it.  Yet after finishing the book I have a hard time wrapping my head around some of his chapters as some were bloody well brilliant and others show an ignorance so profound I nearly stopped reading the book entirely.

Overall Tom offers some excellent advise on being more free like embrace thrift and lower your expenses, get rid of your debt and pay off your mortgage (or avoid getting one in the first place).  Then he spends a lot of book dealing with many of the issues of freedom that exist solely in our heads.  While somewhat obvious, this is something we can forget.  We chain ourselves down in obligations and activities that we don’t enjoy and then complain about them.  Well stop hitting yourself on the head and stop doing those things or change our mind about them…obvious when you think about it but in some cases we need a bit of a reminder.

As an example of the philosophy elements of the book that I liked he talked a bit about chores and one that personally hit home to me was his point about housework.  It’s only a chore if you want it to be one.  If you lower your standards just a touch to accept not doing a perfect job and attempt to make it a bit more enjoyable by listening to music or doing it with others it can be something that isn’t nearly as bad as some people make it out to be.

Then in a few chapters I literally shook my head in disgust on the man’s ignorance.  For example, in chapter 22 he talks about pensions and points out that people who sell them often use fear to sell you their product and that money managers can make lots of money off of your money (in fees) which are true.  But then his solution for this is to forget about a pension entirely. PARDON?!?!?  He offer the following as solutions: keep working, own a home and use that equity to live on or just give up on saving anything and put your fate in God’s hands (aka: depend on your family, friends and neighbours in your old age).  Dear me, what a bloody stupid idea.  Let’s forget about tomorrow and assume I can work forever and hope my house is worth enough to pay for some kind of period of not working in your old age.  Or worse yet do nothing and depend on fate to cover my ass.  Then again that sounds an awful like most boomers retirement plans, but that is another story entirely.

The only other thing that drove me a bit nuts is his excess use of comparing middle ages Catholic approach to life (which was a bit more carefree) to the Protestant norm (think stiff upper lip and belief that work is good) that now exists in England.  While cover it once was a useful insight to the English mindset and you can even easily extrapolate that to North American views, he goes back to it over and over again in the book.

Yet his financial advice is down right dangerous in some cases.  The author clearly points out that he is often in overdraft for his bank account and he doesn’t keep much (if any?) savings.  This obviously can also be a barrier to freedom as you can often relieve a lot of worry in your head just by having a bit of saving for when life tosses you a curve ball (something breaks, insurance claim, or job layoff).  I’ve mocked his point about pensions already, so I won’t beat that dead horse.

So yes I agree with much of the advice in this book which is nicely summed up on the back of the edition I borrowed from the library: life is absurd, be merry, be free.  I would add just don’t forget to put some money side of the world and you will be just fine.

Stop Flogging Yourself

So about now your well intentioned New Year’s resolution might be falling apart at the seams.  After all learning a new habit is hard and we often trip and fall during the process.  Well, at least, I always seem to have issues learning a new habit no matter when I try to get it going during the year.

Yet after failing to get into the habit of writing daily for years, I have come across something very small but helpful that is really getting me to get better at doing it.  The secret to success in this case is very simple: stop mentally flogging myself when I screw up. Huh?

Let me explain.  My cycle typically went like this.  I would be full of hope and determination at the start and then at some point or another fall of the wagon of my new habit.  Often it was small mistake like getting busy one day and forgetting to write.  Then I would feel guilty and immediately try to make up the writing on the next day and double my word count target.  Yet doing two days of writing in one can be hard, so that would often go poorly and I would get more disappointed in myself and I would the miss another day.  Now feeling even worse with a even bigger debt of writing to complete.  Then I would eventually get disgusted and quit the entire attempt.  I would have another epic fail to create a habit to write daily.

This time around, it’s been different.  Why? Like I said I stopped mentally flogging myself.  I don’t try to make up any missed words counts when I screw up a day.  In fact I planned for a few screw up days overall so I don’t have to perfect in the first place.  Now oddly enough, I don’t have feeling of guilt and then shame about messing up a day here or there.  I treat each day as it own personal challenge and I accept I will lose that challenge some days: it’s ok.

I think my problem lies in I was fighting the part of me that was lazy.  By not allowing some goofing off days in my earlier attempts I had doomed myself to feeling guilt and shame and spiraling down to failure.  Now I just accept that fact, I will screw up at times and frankly that is ok as long as over all I’m writing more than I previously was.  Given the option, most people pick being lazy over hard work.  It is sort of a normal feeling to have so life gets easier when you realize this  and plan for it.

Which perhaps is why I’m such a good saver…I’m lazy about it.  I literally forget about it most of the time and only try to do one transfer to an investing account once a month when I’m paying my other bills.  I don’t set a deadline on this action, but rather at some point close to either then end or start of the month.  But if you are just starting out I would highly suggest automatic transfers…I literally did that for years when we got started and it helped out a lot.

So have you been trying out any new habits lately?  How are they going for you? Any tips to share on what works for you?