CBB January 2013 Net Worth Update
Photo Courtesy of Grant Cochrane/FreeDigitalPhotos.Net
It feels like yesterday when I did the update for the end of 2012 and here we are at the end of January 2013 with another Net Worth Update. Looking back over January everything seemed to be running fairly smooth with the new budget and we are optimistic that 2013 will be a better year for us in terms of knowing more about where our financial path will lead us. Up until now we were deciding what we should do with our money, should we invest or should we pay off the mortgage? We met with our financial advisor a few weeks back now whom we spoke to about the Manulife One and The Smith Manoeuvre both of which at one point in time we considered doing. We opted out for various personal reasons but now we have the cash to either invest or design invitations to our mortgage burning fiesta.
The Smith Manoeuvre developed by Fraser Smith is basically about making the mortgage tax deductible whilst paying off the mortgage sooner and building your investment portfolio. There is quite a bit more to this and I won’t pretend to know it all although one day I may do a detailed post on our learning experiences with both. You could check out your local library to take out Fraser’s book or search the web for more in depth information. The Manulife One is an all in one account which is mainly one giant account where you can access your money including the equity in your house but if you are crap with your money you don’t want to go anywhere near this. It’s premise is to have your money paying down all your debts until you need to use the money. It simplifies your finances and helps you pay down your debts faster. For some it’s like an accident waiting to happen although both have their pros and cons we were happy we learned about them. Of course there is much more to each so research them in full if that’s something that you might fancy doing.
We’ve actually had the money for a couple of months now but needed to really think about it even though we were happily saying mortgage free was here and now. I think we answered our own questions even before having to talk about them. It has to be what makes us happy and sleep better at night. We decided to crush the mortgage because it is a sure thing. We could invest our money but as we all know nothing is certain when it comes to investing. So the mortgage will be paid by the end of this term, that is the plan come end of April unless something crazy happens between now and then.
The good part will be no more mortgage the sad part will be looking at our empty bank accounts. It will take time to build up our emergency savings account and working towards our goals of maxing out the TFSA’s and our retirement accounts. There sure will be lots more to discuss with our financial advisor and although we would love to go it alone we’re not quite confident yet to play with our money. I’m sure with further research and networking with my experienced friends who invest on their own we may dabble a bit but taking baby steps. There’s nothing worse than someone thinking they can beat the market or going in with a hot head thinking they know it all when they know nothing. I’d rather admit I know nothing but want to learn; anything is better than telling yourself a lie.
We’ve also been looking around at potential investment properties and talking to real estate agents in our area to hear what they had to say about the local market and whether they thought it was a brave idea at the moment. Some of the houses we looked at in our potential price range in order for rent to sustain the mortgage and maintenance needed lots of renovations and we didn’t want to waste money on the wrong home. It’s no wonder some people might not understand why their house hasn’t sold with the shape they try to sell it in coupled with the price far above market value. Right now is likely not the best time given the high cost of housing in our area but we also still need to save up for a down payment or take equity out of the home. So much to consider but we will cross that bridge when we come to it. First order of business is to own our home straight up.
For 2013 we’ve decided not to move our house value up even though houses that are smaller are selling for an average of $351,000. Either way it’s what someone is willing to pay for your home. Our vehicles prices remain the same as per Auto Trader. I looked up the same model vehicles, same year, same approx mileage with no real change in residual value. We hardly put any miles on it and we are lucky if each vehicle gets 5000 kilometres each year.
Question: What would you do? Pay off your Mortgage or Invest the money?
Question: What are your thoughts on the Smith Manoeuvre?
What does Individual Net Worth mean?
Net Worth is a snap shot of your financial health sort of like a picture. It’s a total of the value of your assets minus your liabilities. Posting our financial numbers is about showing others how budgeting has worked for us.
Who’s the Man behind Canadian Budget Binder? My name is Mr. CBB and I’m the frugal guy that does all the talking around here. I’m documenting and sharing our journey to pay down the mortgage and increase our net worth in hopes of an early retirement.
Net Worth = Assets – Liabilities
Determining Net Worth is fairly easy as long as you know your personal numbers. Net Worth is simply adding up all your assets (what you own) then taking away your liabilities (what you owe) which will give you a net worth number. It doesn’t get any easier than that.
Our Monthly Finance Goal(s)- 2013
- To save as much money as we can while we are young to save for retirement while enjoying the present
- To spend time together as a couple doing the things we love
- Continue with meal planning and recipe creations
- To lower our Grocery Budget with The Grocery Game Challenge
- To spend less than we earn to carry out the above
- To pay off our mortgage with-in the 5 yr term ending in April 2014
- Focus on TFSA and RRSP as soon as the mortgage papers are burned in April or May 2013!
- To Save money for smaller renovations
- Continue to meal plan, create new homemade meals
- To sow and grow more vegetables/herbs in the garden to save money.
- To take vacation somewhere in Ontario this summer
- To take this blog to self-hosted and get a redesign (happening 2013!)
- Learn more about Passive Income (me)
- To Read a new Personal Finance Book (me)
- Learn more about SEO and Blogging (me)
- Continuing to educate ourselves on personal finance and investments
- Continue to Network with other like-minded individuals
- To finish renovating our home
- To continue with educational training to further careers.
- To Save money for big renovations
- Start thinking about saving for a second-hand vehicle for the next 5-7 years
- Save up for a European Adventure in the next couple of years
- Potentially save for a second home to rent out or build our dream home.
Our Financial Numbers
When budgeting anything is possible, we are proof of that although we still have a long way to go in our journey. These are our numbers and our goals, not a means of comparison towards your own goals. We don’t care how much money others make or if their net worth is lower or higher as it’s not a competition. I hope what I post for you about our experiences perhaps will help guide you along that financial path towards debt freedom. Sometimes seeing personal financial numbers is what it takes to kick it into high gear like it did for us. I encourage you to learn what your own numbers are and make them work for you.
Money is Money, Debt is Debt, A Budget is SMART-Mr. CBB
Canadian Budget Binders Financial Health
Overview: We had an Ok month I guess as we lost some money in our emergency savings due to exchange rates and I’m betting next month won’t be any better. I’ve had to go spend $1100 on a new water softener as our decided to give up on us. I’m sure once we get rid of the mortgage it will give us a better picture. We’re starting to sort out all the paper work as I type this. Right now we are looking at money that is going to all dissapear soon into this house and we will be back at nil in our emergency savings. At least then we can focus on what we really want to focus on in terms of investments such as retirement planning, emergency savings and other ventures.
If you want to see our actual budget for January 2013 you can read it here.
Do you know how to calculate your own Net Worth? Why not go ahead and calculate your own using our Free Tool Net worth Calculator (Canadian Budget Binder 2012)
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If you haven’t read it already, Gail Vaz-Oxlade’s new book is great PF read! Getting excited to see the new redesign 🙂
Those are some great looking emergency savings #’s CBB. Keep up the incredible work. Your goals….wow! You are on a mission. SO cool to see this stuff. Have a great day!
We’re working on it mate… gettin there.
Pay off the mortgage as that is an investment you understand and are comfortable with.
I still for the life of me can’t understand an emergency fund that high. If inflation averages 2% a year and you have about $164k in emergency money stuffed in a mattress, you are losing $3,280 per year. Please tell me that money is invested in something?
Get an emergency line of credit, pay no interest and don’t have a bunch of money sitting around doing nothing. You may never have an emergency. You may never need it, but the line of credit is there.
Yes part of the money is making money more than just sitting in a bank and is invested… and the other is making 2% not much but it’s better than nothing. It will all be gone in the next month and we never had that much sitting in there year after year it’s just grown the past few years and we felt it best to leave it where it was. Maybe not the best answer or what others would do but that’s what we did. What would you have done?
For a temporary holding spot, the bank, under the mattress, makes no difference… glad you put it to use paying off the mortgage.
If you had that much money and were going to hold on to it for more than a year I might investigate preferred shares of one of the big canadian banks. They are stable like bonds, and pay about 5%.
If you put it in a savings account, or bond, they would pay next to nothing and the income would be taxed as interest income (one of the highest tax categories).
A good chunk of it was making money that is tax free and the rest was in the bank at 2% which we will get a slip for… What are preferred shares at 5% and would you recommend them for short term or long term? I’m looking for ways to invest our money once this mortgage is gone.
I buy common shares of Canadian companies that have a long history of raising their dividends.
I have never bought preferred shares, but Garth Turner (who is much smarter than me) recommends them for people that want low risk and steady income. It sounds like you have an advisor and I am sure they could explain them to you. From what I gather, with bank preferred shares, the price is very stable and they pay about 5%.
I like common shares of Canadian banks, Telecoms and utilities like Fortis Inc. I am fine with a little volatility because both the share price and the dividend payout raise over time.
Well I’m starting to look into it and I might try my hand at investing on the side without the advisor, wish me luck.. I might need it.
It’s not as scary as it seems. Email me any time. Remember, big stable Canadian companies that pay you increasing dividends. Even if the share price dips for a bit, you get paid while you wait for it to come back.
Passive, increasing dividend income is great! 🙂
Thanks mate, I appreciate that. Cheers
I think paying off the mortgage is a good choice. Numbers aside, this way it’s over and done with, not to be worried about again. Now you can focus on investing and saving and not have to worry about owing one red cent to anyone!
Nice work, Mr. CBB. You’re in a great place, and are basically set for life if you stick to your frugal ways 🙂 Cool to see these updates each month.
Gettin there Jake, so much to think about but we can safely look back now and say we are glad we did what we did. It’s alot of work and sometimes we can’t do everything but we don’t have to worry about the roof over our head anymore and that made it all worth it.
Is the second emergency fund in another currency (I’m assuming pounds) because you are anticipating a financial emergency could come in that currency? If so, the exchange rate doesn’t really matter, because it’s just being spent in the foreign currency. If not, it would make sense to bring that money home now before exchange rates eat at any more of your money.
Yes that is the plan.
Yeah, you’re asking about commissions! 🙂 I think you can start of with a small TD e-series portfolio to get your feet wet if you want, while learning more about building your own portfolio. I’m glad you’re focusing on TFSAs!
How does one sign up for this TD e-series?
You should be able to open one at your TD Bank. I wonder if you can get away with opening up one without opening a bank account.
Other option is to start investing in ETFs. If you sign up with Questrade (free!), they also allow free ETF purchases. This requires you to be comfortable buying the ETFs. Depends on what your comfort level is. You can start with a basic portfolio with 4 ETFs which would give you a decent portfolio to start.
The Mrs. actually has a TD account she hasn’t used in a million years but it’s still open. I wonder if she could just use that. Ya, that’s all I want to do is open something and play around until I get a grip.
The Smith Manoeuvre – it’s an interesting idea, but apparently quite legendary in the banking community. 🙂
It was also something used back in the UK.
I have to say I envy you that you pay your mortgage early. But I’m happy to see you do it too. Great job!!
Well, what will suck as looking at an empty bank account, but I’m not complaining. Just have to work harder and smarter to get it back up again!
I’m one who prefers to be mortgage free. After it’s paid off you can always invest the money that would otherwise have went to the payments. Sleeping well at night is more important than the gains that could be made in the market. Plus investments can cause sleepless nights if they’re not behaving.
That’s the plan at least for now.
Impressed by your net worth and I love that a goal of yours is to spend more quality time together as a couple, something money can’t buy.:-)
Time has been swallowing up our lives so we want to spend more time together. Can’t get back time.
I would probably pay off the bulk of the mortgage and invest a little. As I can redraw on my mortgage I’m not sure I will pay it off entirely until I have to as it is a great source of cheap funds whenever I need it.
That’s similar to the Manulife ONe all your money is in one pot and you can pretty much do what you wish…
It stinks about the water softener, but that’s what E-funds are for. And imagine how much more cash flow you’ll have for savings when the mortgage is paid off!
Ya, I know.. just gotta suck it up sometimes, right lol
Wow!!!! Things are really looking good!!! I’m going to have to look into those two accounts you mentioned to try to understand what they are…. but from you have said the Manulife One is not something we should be going anywhere near!!! I’m so glad you will be paying off the mortgage… I’m jealous too. We are so far from that one it isn’t funny. I plan to look for some financial books at the library book sale in the spring so I can try to educate myself on these things, got the original Wealthy Barber in the fall sale. I’m looking at where we are right now as I got a survey in the mail from Ipsos Reid on finances to fill out. For what ever reason I seem to get one of these every year….. I don’t think it will take too long to get your emergency savings back up once the mortgage is done as you will have those mortgage payments you’re not making any more to help you…..At least while you are considering the options…..
That’s a great idea to get some free books from the library to learn from. I’ve done the IPSOS reid surveys but they aren’t worth my time any longer, I get nothing from them.
I am not familiar with either of those types of accounts you mentioned but they don’t seem like something I’d want to do.
I think it would be hard to pay out most of your savings, but once the mortgage is gone, you will hardly have any expenses. That must be an amazing feeling!
That’s true, we’ve had to suck it up and just learn we will start from scratch… we’re happy that the mortgage will be gone.
I’m utterly envious of your net worth 😉 I love the idea of paying of your mortgage early, I think it’s a great idea!
I think once it’s out of the way we can get a clearer picture of where we want to go. It’s all over the place at the moment. Thanks for reading Cassie
I would personally write a check today for the house and never look back.
Congratulations on nearing the half million dollar mark.
Thanks, we’re hoping to get rid of it very soon!!
We did the Manulife One account. It worked when we had two incomes and childless. However as the family grew, and down to one income — it was not a good fit for us. We didn’t have the time to scrutinize our account and spending with a newborn and unexpected baby expenses. It has to be to worst financial mistake we’ve made so far. With a standard account, we are in good financial health, and satisfied. Note: financial advisers make a commission off your Manulife One Account!
Thanks for sharing your feedback and we did find that out about the commission and it was only told to us after we questioned them.