Quarterly Net Worth Update: Q3 2019

We are going to dig further in this post to break down exactly where our current investments live. We’ve decided to show this net worth update on a quarterly basis so here’s to the first of many posts tracking our net worth. This post will make any visual learners out there like me happy, lots of charts to look at!  You’ll also get a glimpse of the spreadsheet I’ve created to track our net worth.  It’s nothing fancy but it checks off all the boxes for what I’m looking for when updating our portfolio figures.

In the past we reviewed what our FIRE number is, but where are we today? 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 September 23, 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 $87,153 remaining here. So here’s the total amount of our passive net worth:

Hold The Phone.  We Have How Much Cash?

As we mentioned on our Millionaires Unveiled podcast interview, we are very heavy in cash right now. 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 downpayment 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.

Some people reading this may think we are crazy and that we should have more faith in the market.  With everything going on in the world, I’m a bit more weary these days and don’t want to see my portfolio drop by 50% overnight.  Again, 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.

Over the past few months we have shifted quite a bit of our stock allocation into bonds and cash.  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 FIRE in approximately a year and a half from now.  Over the next 1.5-years ~$87,000 of the cash will be going towards killing off our mortgage and 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 ~$24,000/year so in 1.5 years that’s another $36,000 out of the checking account. So with the $215,328 we have in cash now we can expect to have ~$92,328 in cash remaining ($215,328-$87,000-$36,000) 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 year or two 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 ~$40,000 from our current cash fund at the market when a correction comes.  This would be in addition to the $2,000/month we are planning to throw into our stock index funds from my pay check each month until we FIRE.

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: 43%
  • 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: 27%
  • 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: 24%
  • 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: 4%
  • 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…
• Vanguard Canadian Bond Index: 1.6%
  • Dipping my toes into the Canadian bond market with VAB.TO in my Canadian account.
• Vanguard Real Estate Index Fund (VGSLX): 0.5%
  • A little over $3,000 invested here as part of our “fun money” fund. This is our way of dipping our toes into real estate.
• Horizons Marijuana Life Science Index ETF (HMMJ): 0.2%
  • A little over $1,000 invested here as part of our “fun money” fund. Why not! This is total speculation, but I feel the cannabis industry is going to grow as more and more states legalize it.
• Vanguard CAD Stock Index Fund (VCN.TO): 0.1%
  • Less than $1,000 invested here. Sorry Canadians, I feel stronger about the US economy than the Canadian economy. In reality, these markets track each other pretty closely so it’s likely if the US market crashes or soars, so will the Canadian market.

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),
• Canadian Aggregate Bond Index ETF (VAB.TO),
• Vanguard Target Retirement 2045 Fund (VTIVX),
• Vanguard Real Estate Index Fund Admirals Shares (VGSLX),
• Horizons Marijuana Life Sciences Index ETF (HMMJ),
• Canada All Cap Index ETF (VCN)

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.

For my visual learners, the chart below depicts how heavy we are in US index funds. A large majority (86.25%) 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 but we feel comfortable with the 38% of our VTIVX which is in international funds is sufficient. 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 (VTSAX or VUN.TO) and decrease your bond index fund and cash percentages.  I want to stress that 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 1.32, we’d be looking at a total of $1,106,158 CAD in our investment accounts.

Assuming $35,000 in annual expenses, this puts us at a 3.16% withdrawal rate.

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 – $813,709 = $61,291

Only $61,291 left to go!

If we assume we will contribute $2,000/month from my paycheck to this net $813,709 and our overall portfolio grows at 3%, then in 1 year we will be at $862,791. Assuming the same $2,000/month contribution and 3% growth, in 2 years we will be at $913,366. So we are roughly at the 1.5-year mark to reach our FIRE number! If our portfolio grows at 7%, we will be there in less than a year.

Only time will tell!

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 cars combined are valued around $19,000. 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 $813,907 above gets us to a total net worth of:
$1,147,709

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, and all of Nic’s accounts 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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