Quarterly Net Worth Update: Q4 2019

And just like that 2019 is over!  Wow, that year went by quick (doesn’t it always?).  Hope everyone had a relaxing holiday season and a happy new year filled with good health and gratitude.

We had a nice holiday, as my brother flew up to visit us early in December for a week, then we spent a few nights in Nic’s hometown visiting her parents and grandma, and spent Christmas at home with Nic’s brother spending the night when Santa came to visit. We went out sledding and then skating out on a frozen lake in the Canadian Rockies.

Just like in our first Q3 2019 Net Worth post, we are going to break down exactly where our current investments live for our Q4 2019 update.

How have we done in the past three months? How do we compare to our FIRE number? How far away are we from reaching our FIRE number?

A Look Into Our Liquid Assets

As of December 29, 2019 here is a breakdown of our liquid assets (home and car not included as these are illiquid!):

Any Liabilities?

We also still have a mortgage in place that will be murdered in 2021. Currently there is $77,370 remaining here. So here’s the total amount of our passive net worth:

Hold The Phone.  We Have How Much Cash?

Since we are so close to our FIRE date, we are holding quite a bit more in cash than we normally would.  In fact, our current overall breakdown is:

Whoa 24% in cash, say what?! During our wealth building phase we were NOT this heavy in cash. We are not financial advisors in any sense, but we would not recommend holding this much cash during your wealth accumulation phase unless you have a large purchase coming up such as a down payment for a home.  Now that we are approaching our FIRE number, we are being SUPER cautious and do not want to be heavy in stocks.  I’m only thinking this way because we are so close to withdrawing from our portfolio once we retire early and I do not want to fall victim to sequence of returns risk. If the markets grow by 10+% yes of course we will be bummed to not see as big of gains to our portfolio as we could have had we been all in.  However, at this point we are being very risk adverse just as anyone approaching typical retirement age would be.

Our short term play is to be ~60% in stocks and our long term play is to be back at 90-100% in stocks like we were for a majority of our wealth accumulation phase.  The game plan is to transition to that higher stock allocation over the next 5-10 years.

What Are We Planning To Do With All Of This Cash?

Our goal is to retire early in approximately a year from now.  Ideally, it will be March 2021 as I receive my annual bonus in March each year but the end goal is for it to match up with hopeful babes 2 arrival so that we can utilize Canada’s generous 18 month paid parental leave (we will net ~$25,000 after taxes) so that we will not have to withdraw anything during our first year and that we will still be covered with our employee health coverage during that time frame too thus eliminating the need to get supplemental insurance for dental, vision, and prescriptions.

Over the next year $77,370 of the cash will be going towards killing our mortgage. We also use credit cards for everything which are set up on auto pay to come out of our US checking account each month. We are currently averaging an annual spend of ~$25,000/year so there’s another $25,000 out of the checking account. So with the $229,451 we have in cash now we can expect to have ~$127,081 in cash remaining ($229,451-$77,370-$25,000) when we FIRE. The majority of this cash will sit in our Motive Savvy Saver high interest savings account earning 2.8% interest and provide us with more than enough of a cash cushion in our first few years of early retirement. So our cash portfolio isn’t necessarily doing nothing for us this whole time (it’s actually performing close to bonds lately…). This is still too much cash than what we want on hand so the plan is to throw ~$1,000/month towards our tax advantaged accounts to max those out with the goal of ~$30,000 of this remaining ~$127,081 cash fund to be put into the market .

What Do We Invest In?

To dig even further, here is a breakdown of the different accounts we have our non-cash investments in:

• Vanguard US Total Stock Market Index Funds: 47%
  • This is either in VTSAX in my US accounts or VUN.TO in my Canadian accounts. We are big fans of tracking the overall stock market. As we transition into more and more equities over time, it will be into these accounts.
• Vanguard US Total Bond Market Index Fund: 22%
  • We hold VBTLX in my US accounts. This is the highest amount of bond index we have held in a long time. Over time, we will sell down these investments first when it comes time to withdrawing from our portfolio.
• Vanguard Target 2045 Index Fund: 22%
  • VTIVX which is made up of the following: 54% VTSAX, 35% International Stock Index, 7% Total Bond Index, 3% Total International Bond Index. We like target date funds even though it has a slightly higher expense ratio (0.15% vs 0.04%) because it provides us with some international funds and this index rebalances itself over time.
• Company Stock: 8%
  • I only own one individual company stock and it’s for a company I’ve worked at for years. I’m going to leave this broad and not revealing my current and past employers names will be the only secret I keep on the blog as I do not want people knowing where I work.  Maybe I’ll reveal it once we FIRE…

That’s it!  Some acute FImily followers may realize that we made some changes to our allocation over the last quarter.  What did we do?

• We learned that Court should not have a TFSA open since she is a dual US/Canadian citizen.  Instead, we will only be contributing into Nic’s TFSA and we will have this maxed out before we FIRE.
• When we got rid of my TFSA we also got rid of the small “play” funds we were holding inside of here for simplicity (Vanguard Canadian Bond Index, Vanguard Real Estate Index Fund, Horizons Marijuana Life Science Index ETF, Vanguard CAD Stock Index Fund).
• We switched Finn’s RESP from TD to Questrade (now we no longer have to pay anything to purchase funds within this account, and Questrade paid for the transfer fees).
• We switched Finn’s RESP from having both of us as being subscribers to solely having it under Nic’s name since she is not a dual citizen and there are double tax issues if I were to be linked to is.
• We added in another $2,500 into Finn’s RESP (we do not include this account as part of our passive income).
• We moved our RRSP with Great West from my previous employer over to Questrade (goodbye 1.65% fees!).
• We purchased our 3rd car with the hopes of selling the other 2 over the course of the next few months as we transition to a 1 car family.  We bought a used 2013 Subaru Legacy AWD sedan with 178,000 km (108,000 miles) for $6,000.  It comes with remote start and heated seats which are definitely bonuses (and not necessities).

Here’s a chart with the breakdown:

As you can see, we are big fans of Vanguard, index funds, and low fees. If you are interested in learning more about any of the funds we invest in, click on the links below:

• Vanguard Total Stock Market Index Fund Admiral Shares our (VTSAX),
• US Total Market Index ETF (VUN),
• Vanguard Total Bond Market Index Fund Admirals Shares (VBTLX),
• Vanguard Target Retirement 2045 Fund (VTIVX),

Again, we want to highlight that we are in no way financial advisors and we are NOT recommending that you mimic our portfolio. We are simply documenting what we do. In fact, for most people reading this, you are likely still in your wealth accumulation phase and we’d recommend to VTSAX and chill (or VUN if in Canada). I also like XAW which I am going to start funneling some more into for some more exposure to international accounts.

For my visual learners, the chart below depicts how heavy we are in US index funds. A large majority (82.42%) of our investments from stocks or bonds are in either a US stock market index funds or US bond market index funds (a majority of the Vanguard Target 2045 fund is in US holdings). Some may argue that we should have more international funds in our portfolio and we are going to make some adjustments this year to get ~10-20% of our portfolio in international funds (currently it’s at 8.36%) with XAW mentioned above.  It can be argued that many of the companies in the US stock index have a significant amount of business taking place abroad. Again, we are not here to argue or tell you what to do, we are simply showing you our story and methodology.

And again, we would NOT recommend this portfolio if you are working on building up your portfolio and nowhere close to approaching your FIRE date. I would suggest to drastically bump up your stock market index fund percentage and decrease your bond index fund and cash percentages.  This is just our short term plan with the final plan to be closer to 90-100% in equities.

What About Currency?

Note that for the sake of this exercise, we are keeping all currencies as is in their current currency denomination, but as we mentioned in our previous post, we are using currency arbitrage to keep our safe withdrawal rate below 4%.

As of this writing, 71% of our accounts are in USD and 29% are in CAD. If we converted all USD to CAD based off today’s exchange rate of 1.31, we’d be looking at a total of $1,160,709 CAD in our investment accounts.

Assuming $35,000 in annual expenses, this puts us at a 3.01% withdrawal rate.

We also have the Canadian Child Benefit working in our favor which brings our withdrawal rate in the 2-2.5% range.

Where Do We Stand?

For those who have been following along, you know that our FIRE number is $875,000.

So let’s do some simple math:
$875,000 – $874,955 = $45

WHAT!?! Only $45 left to go!  Should we start a Go Fund Me page for this last bit?? 😉 

The market TOOK OFF this quarter and just pushed us to our FIRE number.  Personally, I’m a bit skeptical of this bull run and expecting some sort of dip here soon (when exactly, who knows) but it’s essentially time to celebrate!

Our Net Worth:

As for our total net worth, we would then add in the value of our illiquid assets like our home and cars we well. Our townhouse is valued at roughly $315,000 and our three cars are valued around $21,000 with the goal of selling one for $9,000 and the other for $6,000. Of course we will not know the true value of these illiquid assets until we actually sell them down the road.

Adding these two figures into our net passive investments of $874,955 above gets us to a total net worth of:
$1,210,455

Those following along know we have a few other items in our portfolio that we like to hide behind the scenes as our true emergency fund such as my HSA, my pension, our child’s RESP, any CPP/SS/OAS/GIS potentially coming our way in the future, and all of Nic’s accounts except for her TFSA so for the sake of this exercise we are not including them.

Voila! Stay tuned to see how our net worth has changed in 3 months when we check back in on this.

What is your asset allocation and where are you at on your journey (i.e. paying off debt, wealth accumulation, retired early, etc.)? Do you calculate your net worth?  If so, how often do you check in on your accounts? As always, thanks for tuning in and comment below 🙂

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We believe in stacking up life hacks to keep your enjoyment levels to the max without depleting your bank account.  Here are some ways to further educate yourself and save thousands of dollars over your lifetime by making some simple adjustments:

• Investing Newbies: Check out our free Investing 101 Series.
• How much are you paying for your phone plan?  Canadians, learn more about Public Mobile, and see how we are paying $3/mo for our cell phone plan.
• How much are you paying for internet?  Canadians, learn more about the various Independent Service Providers out there to see who services your area so you can lower your monthly bills.
• How much are you paying for home insurance?  We were able to reduce our rates by 25% by switching over to Square One Insurance.  If you live in BC, AB, SK, MB, and ON, check out Square One for your home insurance, landlord insurance, and/or tenant insurance.  Use this link to receive an extra $15 off your quote.  (Note that you must use this link to start the process to get the $15 off even if you prefer to pay over the phone.)
• How much are you paying for your monthly utility bills?  See how you can likely save on this monthly expense.

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