Financial Independence – June 2018

Happy Sunday everyone!

I took a big step personally last week, as I actually outlined my financial goals. As a natural follow-up to that, here is my first FI update comparing January 1, 2018 to July 1, 2018:

Observations

1. Debt?
   • Firstly, we are luckily in a position where we have virtually zero debt. At the moment, the only loan on the books is on our 2012 Toyota Yaris, where we carry a balance of about $6,000. For this, I’m treating the resale value of the car as equal value to the outstanding loan and net this to zero.
2. TFSA up +112%
   • Back in October 2017, we had originally taken out some cash from the TFSA (An after-tax savings account) for a house that we placed a bid on (eventually outbid).
   • The TFSA has a cumulative contribution ceiling where if you withdraw, you don’t recover that contribution room until the next calendar year.

As an example…

In 2017: You had maxed out your TFSA account at about $55K and withdrew $10K. You would have zero contribution room left in 2017. Your ending balance is $45K.

In 2018: The calendar flips to a new year, new beginnings, new you! Woohoo! As a gift, you are given an extra $5K in TFSA room. So the cumulative ceiling is now $55K + $5K = $60K. You’re able to top up the TFSA to this new cumulative contribution ceiling. So you’re now able to put $60K – $45K = $15K in for 2018.

1. • Given the point above, this is why cash balances were so high on January 1. I couldn’t add the amount back into my TFSA in 2017, so I had to wait until 2018 where I then topped up my TFSA and put that money to work. I don’t like keeping too much cash on hand due to opportunity cost (Stashing bills under your mattress isn’t free as inflation will erode your buying power – you need to keep that stash earning inflation at a minimum). I want to have that money invested for any horizon longer than 1 year, but this will depend on your own personal risk appetite!
2. RRSP  up +24%
   • This is simply due to automatic withdrawals every paycheque and fluctuations in the market.
   • I invest in low cost funds offered by my employer and get exposure to equities in Canada, US, developed markets, and emerging markets.
3. Cash down -54%
   • As mentioned earlier, this is primarily due to moving cash into the TFSA.
   • We currently have $13k in cash. Part of this is accumulation for wedding costs (next year in May). I am not investing this as the investment period would be less than a year and the event is certain! Because of this, I’m maintaining our wedding fund in a Tangerine savings account that is earning me a small return (Checking while writing this, we get a whopping 1.1% 🙂 ).
4. The TFSA balances are mostly for an eventual down payment on a house. At the earliest, this will be in about a year from now, but it will depend on the housing market. I do currently hold a mix of equities in my TFSA despite the volatility due to Trade War / Protectionism talks going on right now and all the potential turmoil. So while this doesn’t contribute to my $1.5M I am after for a retirement fund to draw on, it will eventually go towards home equity and does count towards net worth!
5. Overall, we’ve boosted our net worth by $28,000 or +27% over 6 months. I expect slower growth in the second half due to my bonus payout being in the first half of the year. We also expect to have a net cost on the Wedding of about -$9K which we are comfortable with. It is an affordable cost to enjoy the beautiful venue we have booked with our family and close friends on a very special day for us!

We will be headed off on vacation to Germany for a couple weeks starting on Tuesday to visit Family, enjoy the outdoors, and have a few beer steins! So I may also take this time to recharge and come up with new blog post ideas. Alternatively, maybe I’ll be inspired to write more often – I guess we’ll see!

Hope everyone is enjoying a great Summer!