Having recently visited Vancouver for the very first time (my jaw is still on the floor over Vancouver’s real estate prices, and that is saying a lot since I’m from the Toronto area), I’m imbued with renewed motivation to grow our wealth.
For the month of November, we stayed frugal as usual. Besides a few mini road trips this month, my husband and I made do with our measly entertainment budget.
I have always (wrongly) associated frugality with lifestyle deflation. This is actually far from the truth. We still have plenty of fun. We just have to be more creative about our entertainment options, and mindful of how we allocate our budget.
These days we cook at least 95% of our meals at home. Our goal is to spend no more than $3 per person per meal, which can be easily achieved if we buy groceries as opposed to eating out or ordering takeouts.
So how are our frugal lifestyle choices helping us financially? That’s a question net worth updates could answer.
With the holiday season just around the corner, I figured this would be a good time to start publishing net worth updates in order to track our progress month over month.
But before I do that, I want to talk about our assets and liabilities in greater details to provide more contexts.
This would be a fun read if you’re interested to know how we got to where we are in the first place.
So let’s begin.
We bought our house a year ago in the Toronto suburbs, during the era of “bidding wars” when properties were routinely sold way above asking. My husband and I made an offer (3% above asking) on this house the same day we saw it, and came to an agreement with the owner (who was eager to close) after some back-and-forth.
My husband and I basically split our 26% down payment evenly (though to my husband’s credit, he shouldered most of the closing costs), and we borrowed the rest from a “B” lender that we connected with thanks to our mortgage broker.
Is our mortgage rate higher than normal? Definitely, but we don’t sweat it too much. As 2 self-employed individuals, our mortgage choices were limited.
About the house itself, it clearly hasn’t been properly maintained for several years. While everything is perfectly serviceable as is, there is no shortage of upgrades and fixes to be done.
We took care of most of the fixes since we moved in, including installing a new garage door, filling a large hole in the walk-in closet, repainting small parts of the living room, covering water stains on the basement ceiling, etc. We even modernized the master bathroom.
The house currently accounts for 70% of our assets, which is higher than what we’re comfortable with. We REALLY need to diversify our assets to mitigate risks, especially considering the double whammy of stricter mortgage regulations and the foreign homebuyers’ tax that Ontario imposed this year, that is sure to cool down housing prices in this part of the country.
Based on what similar houses in our neighborhood have been sold for, our home value hasn’t gone up since April of this year.
If that changes, I will be sure to update the value of our house in upcoming net worth updates to reflect the appreciation (or depreciation).
As a random aside, a Canadian-equivalent of Zillow would come in handy for objective assessment of home values. Since the Toronto Real Estate Board was recently ordered to make home sales data public, here’s hoping that we will get our own Zillow in the not-so-distant future.
Included in this category are money in our personal accounts, business accounts, joint account and emergency fund.
As we pay off credit cards and transfer money to our RRSPs and TFSAs immediately after getting paid (unless we’re saving for a major purchase), our cash savings are usually tiny. I bet most Canadians have more in their bank account than I do in my personal account.
However, we’re currently saving for the down payment of our first rental property, so we do have more savings than usual right now.
The state of our RRSP accounts is, let’s just say, less than ideal. It’s not disastrous. It’s just a tad far from where we “should” be at our age.
- My husband withdrew close to $20,000 from his RRSP to fund the purchase of our home.
- I have only started maximizing my RRSP contributions this year. Up until now, I basically contributed whatever I felt like each year, which is not the way to go about it at all.
Most of my RRSP investments are in a mutual fund, and I would be severely penalized if I transfer it to a different brokerage account in the next couple of years. I have stopped contributing to that account altogether, and instead opened a new RRSP account with Questrade which mainly holds ETFs right now.
Counter to mainstream best practices, we’re not making monthly contributions to our RRSPs. Instead, we make lump sum payments every once in a while. As self-employed folks, we get paid sporadically so this approach works for the moment being, although it does require more discipline.
4.16% of our assets are in our TFSAs right now.
The cumulative TFSA contribution room is $52,000 as of 2017. Hopefully my husband and I can each top it off in the next 2-3 years.
Going forward, we want to consolidate our multiple TFSA (and RRSP) accounts and move them over to Questrade where we can benefit from low-cost ETF trading.
Our TFSAs currently only hold Canadian stocks, ETFs and REITs to be tax efficient.
I started investing in cryptocurrency in early November, after an interesting chat with my mom. So far my cryptocurrency portfolio holds minuscule quantities of Bitcoin, Ethereum and Litecoin, but I’m happy to see where this leads us to.
Life Insurance Cash Value:
Both my husband and I acquired cash-value life insurance in our mid-20s.
I vividly remember when I bought mine all those years ago. It was one of the first investments I’ve ever made. A wise one, I might add, as premiums for comparable life insurance policies (same age, same terms, etc) has gone up drastically since then.
Finally, we’re putting our miscellaneous assets in this last category, representing a tiny percentage of our assets.
The values of these assets shouldn’t fluctuate too much.
Beside my recurring business, transit and phone expenses, I don’t use my credit cards all that much. So it’s easy to keep my credit cards paid off at all times.
My husband, on the other hand, incurs more expenses on his credit cards (such as car insurance, fuel, cleaning company, etc), but he tries his best to have those paid off every month as well.
We’re also consumer debt free, and intend to keep it that way.
The bulk of our liabilities lies with our gigantic mortgage.
We make bi-weekly payments from our joint account.
Our goal is to eventually switch our mortgage to an A lender. But as of right now, we’re making do with the hand that we’ve been dealt.
As we live in the suburbs, we pretty much need a car to get around and for my husband to get to work every morning.
Car ownership has been quite expensive for us, and it particularly stings when we look at our expenses from two years ago, when we were car-free downtown dwellers.
Because we’re leasing our car, we do not include it in our assets, but we are adding it to the liabilities column (total car lease = monthly payment x the number of months left on the lease).
As of this month, I personally owe around $15,000 in student loans, at 3.7% interest. At the current rate of repayment, I will be saying goodbye to my loan in 5 and a half years.
I’d love to have it all paid off now and not have this debt loom over my head, but it’s not one of our top priorities at the moment.
There you go. I’ve shared as much about our current assets and liabilities as I comfortably can.
Going forward, I will update percentage increases or decreases for each asset and liability so I can properly document our progress towards our $1 million net worth goal.