Financial Independence – December 2018

Hi everyone! Here is my FI update for December 2018 end of 2018Q4.

• My FI goals are outlined here!
• Last FI update as at 2018Q3 here!

For 2018Q4, we had a number of large expenditures, repayments and the downturn in the broader equities market.

1. Large expenditures – I’ll admit, we spent a fair chunk of change on Wedding related items in October & November. Roughly $5K. The Wedding is a real hit to our balance sheet, but we’ve weighed the pros / cons a number of times and are still very excited that we will get to share a very special moment with everyone important in our lives. The main goal was to have great music, excellent quality food and lots of it, and enough drink to keep everyone’s motor going throughout the night. Once again, we are comfortable with the opportunity cost.
2. Repayments – This is a minor setback. As I wrote about previously, I took a new / old job back at my previous employer, called employer A. While doing this, I had to repay a hiring bonus I received from employer B. While I originally received that hiring bonus after-tax, I needed to repay the entire thing (including the taxed amount I never saw) and will receive the tax refund when I file later this year. Ultimately, it was a $9K cash outflow. However, I am expecting to be refunded approximately $4K come tax season and I had a very favourable salary increase so over time, this will  be the preferred financial path (and correct career path!).
3. Downturn in Equities – We all saw what happened over 2018Q4. Ugly. Down right nasty if you’re looking at it through a short-term lens! BUT! Comparing it to what’s happened in historical bear markets, it’s a fairly minor correction at this point. During the turbulence, I did transfer a large chunk of my TFSA equities into cash and stashed it in my High Interest Savings Account with Tangerine. I did this because the purpose of this money is for a down payment on a home, ideally in the very short term so my risk tolerance for the market volatility on that particular chunk of equity is quite low; I lost very little during this transfer. However I still have some equities exposure in our TFSAs, and broad equities exposure in my RRSPs. All-in-all, probably lost about $8.5K.

Despite these three major points (-$22.5K), we still contributed solid savings from income. My year-end goal was to attain $150K in net worth. Here we are as at December 30, 2018, and sit at $132K. We have failed! Worse yet, we’re lower than 2018Q3! That’s alright though, I’ve reviewed our portfolio despite the -10% dip, we’re feeling good about what we can control – our savings rate!

All that being said, here’s my update:

Observations

1. TFSA (Down -64%)
   • Wild swing! Like I said, we shifted a large chunk of this out of equities and placed it into Cash, for the purpose of this money is a down payment, possibly this Summer. Overall, we liquidated about $32K while leaving the rest exposed to equities for the time being, looking for a momentum play in markets (the pendulum affect – a good read on this is “Mastering the Market Cycle” by Howard Marks). On the $21K left in, we dipped about -12%.
2. RRSP (Down -1%)
   • Barely any movement on a net basis. The market took a big chunk, probably -10%, but contributions kept things steady.
   • Better yet, as prices dropped, I was able to purchase more units with the same amount of contributions. Over the long-run, this will work out nicely! (Don’t you wish markets were depressed throughout your cumulation period, only to bounce WAY up when you’re ready to to be financially independent? Hmm).
3. Cash (Up 70%)
   • See TFSA.

All-in-all, still not a bad year as we improved net worth by +30%. The sting of not making my $150K is lessened as we’re about a month into 2019Q1 and things are looking fantastic thus far. Hopefully they can continue!