Every time I get paid (every two weeks), I update my net worth. The idea behind this is that my goals are that my liabilities drop every two weeks, and by tracking them in this way, I am able to get a nice picture of where I stand financially. Its not a perfect balance sheet that I have (because of student loans I have a negative net worth), but the progress is what I am looking for.
ASSETS:
- up $373.82 from August 14th, 2009
- up $6009.10 from August 29th, 2008(one year ago)
These assets include my house (I give it 1% appreciation each year in my appreciation), my RRSP and my TFSA. The market went up a little bit in these two weeks, and I went to the bank to raise my contributions so this should continue to rise at a nice rate.
LIABILITIES:
- better $461.33 from August 14th, 2009
- better $10,978.26 from August 29th, 2008 (one year ago)
These liabilities include my mortgage, student loans and a consolidation loan (mainly for my Masters Degree for teaching). My credit card is now slightly higher than zero (because I forgot that I had to pay condo insurance). This should impress upon me the importance of having an emergency fund.
NET WORTH:
- better $835.15 from August 14th, 2009
- better $16,987.36 from August 29th, 2008 (one year ago!)
I am hoping that these nice numbers can continue as school begins again. I am no longer getting extra paycheques because of summer school, but in a previous post I mentioned that I am lowering my taxes on each paycheque. This money will go to a loan. Looking forward, I am feeling pretty good about my finances. My net worth continues to be at an all time high and my goals of my liabilities always dropping each paycheque has worked pretty well so far (although my statistics say this only happens 72.2% of the time since I bought my house two years ago).
The last thing I am going to track is the value of the TSX. I have some asset allocation goals that I will share in future posts, and they are dependent on the value of the TSX.
TSX Graph
Current Value: 10,977.97
Highest Value in Last 2 Years: 15073.13 June 18th, 2008
Saturday, August 29, 2009
Friday, August 28, 2009
What I Did With My Pay Increase
Today I did the first two steps in what I will do with my pay increase: I increased my RRSP savings by $25 every two weeks and I increased one of my loans $40 (to just come out at the beginning of the month).
I expect to get a raise of about $100 per paycheque (as a teacher in a union it is quite predictable to what I will get), and I will also increase my mortgage once my property taxes rise (that will be the third step). I decided to just increase at the beginning of the month for my loan rather than every two weeks to give me a bit more float cash at the middle of the month. I always find the 15th of the month to be a bit tighter because all of my monthly bills (heat, hydro, internet, etc.) come out at that time and I don't have my rent coming in to buffer it.
Summarizing, at the beginning of the month I have spent an extra $90 and at the middle of the month I have spent an extra $50 (or will once I raise my mortgage). Also, I currently have 12.5% going into a bond fund and 87.5% going into a Dividend fund. Long term, I want my deposits to be between 5-10% each deposit into the bond fund and the rest into an index fund, then I will balance them when the markets are at a good time.
Hopefully this will inspire some people to plan what they will do with their raises (rather than just have extra spending money altogether). Please note that I left myself an extra $10 at the beginning of the month and $50 at the middle of the month, so not all money was accounted for. My long term goal will be to save 50% of my raise and to hang onto 50% of my raise.
I expect to get a raise of about $100 per paycheque (as a teacher in a union it is quite predictable to what I will get), and I will also increase my mortgage once my property taxes rise (that will be the third step). I decided to just increase at the beginning of the month for my loan rather than every two weeks to give me a bit more float cash at the middle of the month. I always find the 15th of the month to be a bit tighter because all of my monthly bills (heat, hydro, internet, etc.) come out at that time and I don't have my rent coming in to buffer it.
Summarizing, at the beginning of the month I have spent an extra $90 and at the middle of the month I have spent an extra $50 (or will once I raise my mortgage). Also, I currently have 12.5% going into a bond fund and 87.5% going into a Dividend fund. Long term, I want my deposits to be between 5-10% each deposit into the bond fund and the rest into an index fund, then I will balance them when the markets are at a good time.
Hopefully this will inspire some people to plan what they will do with their raises (rather than just have extra spending money altogether). Please note that I left myself an extra $10 at the beginning of the month and $50 at the middle of the month, so not all money was accounted for. My long term goal will be to save 50% of my raise and to hang onto 50% of my raise.
Thursday, August 27, 2009
Less Taxes
I have finally filled out my Form T1213, Request to Reduce Tax Deductions at Source, where the government will tax me less each pay cheque because of my RRSP deductions. The math behind this is because they are over taxing me I get back several thousand dollars at income tax time. If I get a little bit more each paycheque, they will hold onto less tax on my behalf, and I will be able to earn interest on this money (or pay off loans...which is what I plan to do with it).
I have thought about this a bit, and am only having them deduct half of my RRSP deductions, leaving the other half for myself at income tax time. The reason for this is threefold: first, I like getting a little bit of money back at tax time, second, I wouldn't want to try to plan it to the nearest cent and then owe money in March and third, because I took advantage of the Home Buyers Plan, I will start repaying it this year, so I need some of my RRSPs to do so.
I will know in 2-4 weeks if this actually goes through, but I expect that it would. All I needed to send them was a copy from my bank (you can get it from your work if they take RRSPs from you) of my regular payment plan. Once it goes through, the government sends notification to your work and your taxes get lowered. It’s as easy as that! I'll repost on here when it actually goes through.
I have thought about this a bit, and am only having them deduct half of my RRSP deductions, leaving the other half for myself at income tax time. The reason for this is threefold: first, I like getting a little bit of money back at tax time, second, I wouldn't want to try to plan it to the nearest cent and then owe money in March and third, because I took advantage of the Home Buyers Plan, I will start repaying it this year, so I need some of my RRSPs to do so.
I will know in 2-4 weeks if this actually goes through, but I expect that it would. All I needed to send them was a copy from my bank (you can get it from your work if they take RRSPs from you) of my regular payment plan. Once it goes through, the government sends notification to your work and your taxes get lowered. It’s as easy as that! I'll repost on here when it actually goes through.
Wednesday, August 26, 2009
Investing Theory
I'd like to discuss today an investing theory that I was discussing the other day that will guarantee conservative growth over time. It is based on the theory that most of your portfolio should be conservative with a small percentage (some say 5%) in something aggressive.
The theory behind this is that all of your deposits should be in something safe, be it a bond fund or a GIC or something with guaranteed growth. At the end of the year, any profits that you have made on this investment will be put into something more aggressive, even if it is just a Canadian Index fund.
Let's use a few numbers to get an idea. Assume that your GIC earns 5% per year and that you deposit $10,000 into it each year.
After 1 year: $10,000 in your GIC, earning $500 interest. This $500 gets put into your more aggressive fund.
After 2 years: $20,000 in your GIC, earning $1000 interest. This $1000 gets put into your more aggressive fund, making $1500 total.
After 3 years: $30,000 in your GIC, earning $1500 interest. This $1500 gets put into your more aggressive fund, making $3000 total.
...
After 10 years: $100,000 in your GIC, earning $5000 interest. This $5000 gets put into your more aggressive fund, making $27500 total.
Of course, the more aggressive fund can fluctuate making that $27500 total be able to go up or down with ease. As well, the initial deposits doesn't just have to be into a GIC, you could do 75% conservative deposits, 25% aggressive deposits, with still the interest earned on your conservative investment going into the aggressive investment.
There is one fundamental problem I have with this investment style, and that is that it gets *less* conservative as time goes on. If I have been saving for 20 years, I want to make my portfolio potentially more aggressive when I am younger (to maximize growth) and less aggressive as time goes on. This does the opposite. In this guaranteed system though, there is no potential for loss as you are only "gambling" (if you want to call investing a gamble) with your interest gained.
The theory behind this is that all of your deposits should be in something safe, be it a bond fund or a GIC or something with guaranteed growth. At the end of the year, any profits that you have made on this investment will be put into something more aggressive, even if it is just a Canadian Index fund.
Let's use a few numbers to get an idea. Assume that your GIC earns 5% per year and that you deposit $10,000 into it each year.
After 1 year: $10,000 in your GIC, earning $500 interest. This $500 gets put into your more aggressive fund.
After 2 years: $20,000 in your GIC, earning $1000 interest. This $1000 gets put into your more aggressive fund, making $1500 total.
After 3 years: $30,000 in your GIC, earning $1500 interest. This $1500 gets put into your more aggressive fund, making $3000 total.
...
After 10 years: $100,000 in your GIC, earning $5000 interest. This $5000 gets put into your more aggressive fund, making $27500 total.
Of course, the more aggressive fund can fluctuate making that $27500 total be able to go up or down with ease. As well, the initial deposits doesn't just have to be into a GIC, you could do 75% conservative deposits, 25% aggressive deposits, with still the interest earned on your conservative investment going into the aggressive investment.
There is one fundamental problem I have with this investment style, and that is that it gets *less* conservative as time goes on. If I have been saving for 20 years, I want to make my portfolio potentially more aggressive when I am younger (to maximize growth) and less aggressive as time goes on. This does the opposite. In this guaranteed system though, there is no potential for loss as you are only "gambling" (if you want to call investing a gamble) with your interest gained.
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