Quarterly Net Worth Update: Q2 2022

Hey everyone!  Last week we tackled the life and spending side of things and this week we’re back with a net worth update.

How Do We Stand

As noted in our recent post with our updated FIRE goals/numbers, we are aiming to get to the ~$1.26M mark as our FatFIRE goal.  When I took off on parental leave, my goal was to somehow reach this figure by the time my parental leave is up thanks to my 1/2 year bonus for 2021 that I recently received in March + compounding doing its thing + our low spend allowing us to keep our capital preserved while living off EI (pay for parental leave) + CCB (Canada Child Benefit) for the most part.  In Q1 2022 we were sitting soooo close at $1,253,476 without the mortgage so $6,524 to go.  So closeee!  And then… the markets really decided to tank on us!  Gee thanks!  Let see how we compare with our goal.

Our current liquid portfolio is sitting at:

$1,398,380

Wait, what?!  How is it up from last quarter with the markets being down?!

Townhouse Update

We sold the townhouse! Ta-da! Money magic!

We (Court) were crazy lunatics the week after getting back from Vancouver Island as our townhouse was now vacant and we were cleaning and fixing minor items to get it ready to list.  We ended up selling it within 24 hours of listing – it sounds short but man oh man that was a whirlwind of a time!  Surprise, surprise – we sold it to a family from ON looking to move back to AB.  While the rental income was easy and relatively hassle free, we are glad to no longer be landlords.

We listed it for $379,000 and sold it for $385,100.  After lawyer and realtor fees, we ended up with a deposit of $367,000 in our bank account.

Note, 1.5 years ago we tried to sell it – no luck, hence why we rented it out.  We listed it for $313,000 thinking if someone offered anything over $300,000 we’d take it.  Glad we waited and got rental income for 1.5 year + a higher sell price!

We do still have the mortgage in place on our home (~$250,000) which is why our liquid portfolio is so high above.  Rather than take the proceeds from the townhouse sale and pay off the mortgage on our primary home completely, we have decided that we will set up a GIC ladder to continue paying the monthly amounts for the remainder of our 5 year term and once that is up in ~3 years, then pay off the mortgage completely.

Why?

We have a 5 year fixed rate term sitting at 2.04% interest.  Remember those good ole days of low interest rates?  We were lucky to have gotten in then.  3 year GICs are currently offering interest rates of 4.74% (and rising).  We will gladly pay 2.04% interest knowing we will get 4.74% on that same money.  Overall this will bring us ahead by ~$15k doing this vs paying off the mortgage in full today.  Major thanks to our FIRE friend Chelsey for nerding out all of this and creating some spreadsheets digging into different options for us!!

Prior to running all these scenarios we sent a large lump sum of ~$48,000 to the mortgage as part of my work bonus payout so the mortgage went from ~$300,000 to ~$250,000 this quarter.  Looking back, this was a silly move but oh well!

So really, we need to take out the amount being earmarked for the mortgage payments / GICs as all of that cash has a plan over the next 3 years to go towards the house, not towards our day-to-day spending in a post-FIRE world.  For simplicity, we will remove the mortgage balance remaining from the liquid portfolio to see our true FIRE number.

Mortgage Balance Remaining: -$252,071

Net Portfolio: $1,146,309

(This is the number that we really care about!)

Changes This Quarter

• As noted above, we sent a large lump sum to the mortgage.
• We sent the remainder of my bonus payout to our taxable account.  Thankful to be able to have cash on hand during a down market even without jobs.
• We sent some of the townhouse proceeds to our taxable account.  A good chunk ($40k) is still parked in cash there and will be invested over the next few months doing DCA.
• Invested $10k into i bonds (Series I Savings Bonds) through the US Treasury as they are currently yielding 9.62%.  Earmarked another $10k of our US cash to throw into i bonds in 2023 if rates are still high then.
• Finally received our tax return from the CRA! (US continues to be $0 yet such a pain to file.)
• After calculating how much money we would need for the mortgage payoff with GICs (not as much as the current mortgage balance as the money is growing in the GICs), we decided on how much cash we want to have on hand. Here’s what we came up with:
  • $16k for year 1 monthly mortgage payments
  • $35k for year 1 spending
  • $35k for year 2 spending
  • $6k for year 1 TFSA contribution
  • $6k for year 2 TFSA contribution
  • $5k for year 1 RESP contribution
  • $5k for year 2 RESP contribution
  • Total: $108k cash

Portfolio Details

Once we FIRE, any taxable income/dividends we receive from our taxable account we plan to withdraw, rather than drip right back into the non-registered account.  With this GIC mortgage payoff plan, we also will have interest income to report over the next 3 years from that (taxed like ordinary income).  We will also withdraw from a mix of our RRSPs/taxable accounts first up to the federal basic amount (accounting for any dividends, earned income, etc).

Stocks/Bonds/Cash Allocation:

• Stocks: 65.3%
• Bonds: 4.7%
• Cash: 28.7%
• Crypto: 0.6%

We’re sitting wayyy heavier than we want in cash right now thanks to the townhouse sale.  If we take out the money going towards mortgage payoff, we’re then sitting at:

• Stocks: 79.7%
• Bonds: 5.8%
• Cash: 13.8%
• Crypto: 0.7%

That’s more like it.  Our plan is to glide back to ~90% equites over time.

We’re currently sitting at a 61/39 USD/CAD split.  With the USD/CAD exchange rate sitting at 1.29 our liquid portfolio fully converted into CAD is $1,349,997.

Withdrawal Rates

Let’s see what this means when it comes time to withdraw.

I like looking at a few different scenarios as we can cut down our spending if need-be in hard times (market tanks – hello 2022!).  I also like looking at what our withdrawal rate looks like with Canada Child Benefit (CCB) factored in since it is such a juicy benefit that we will be receiving for the first ~15 years. We do NOT rely on any external support in our FIRE figures (CCB, CPP/SS, OAS) and view them as icing on the cake or to account for any future unexpected medical expenses we may encounter in old age.

	Convert USD to CAD	w CCB		Not convert to CAD	w CCB
$25k/year	1.85%	0.59%		2.18%	0.70%
$30k/year	2.22%	0.96%		2.62%	1.13%
$35k/year	2.59%	1.33%		3.05%	1.57%
$40k/year	2.96%	1.70%		3.49%	2.01%
$45k/year	3.33%	2.07%		3.93%	2.44%
$50k/year	3.70%	2.44%		4.36%	2.88%
$55k/year	4.07%	2.81%		4.80%	3.31%
$60k/year	4.44%	3.19%		5.23%	3.75%

Even with all the market craziness, it’s pretty awesome to see that the only scenarios where we are currently over the “4% rule” is if we spend $50k/year and not have the USD/CAD conversion in place and also assume $0 in CCB. Similarly at the $55k/year mark we are over if we do not include CCB but include the currency conversion.  It is highly unlikely we will spend $50,000+ every year and have the USD/CAD sit right at par and somehow see CCB dramatically altered/removed in the near future.

As tallied up in our Q2 life and spending report, we spent ~$39k this year so I’m still loving what we see in this chart despite all the recent market craziness!

Putting It All Together

Total Assets:

• Liquid Investments: $1,398,380
• Home: ~$400,000*
• Total: $1,798,380

*Our house could sell for over $500,000 in today’s market but we like to keep this value close to our purchase price as we do not know the true value until we actually sell in the future.

Total Liabilities:

• Mortgage on our primary residence: $252,071
• Total: $252,071

Net Worth:

$1,798,380 – $252,071 = $1,546,309

Total: $1,546,309

There we have it! Comparing this to last quarter, we were sitting at $1,651,413 so we are down $105,104 or 6.36%.  While it’s painful to see 6 figures poof out the door it’s not as bad as a 100% equities portfolio which would be down by more than double that this quarter.  Not being 100% invested in stocks and the townhouse net proceeds ending up being larger than my $300,000 estimate definitely helped out this quarter.  I am hopeful that we see a rebound in these markets soon, but who knows what the future holds!  Comparing this figure to this time last year, our net worth was $1,524,413 so we are up $21,896 or 1.01% in a 12 month period.

Since taking time off at work in June 2021, we’ve seen our net worth grow by $21,896.  Even though this is definitely a dip from last quarter, this is still just wild to me.  It will be fun to track this number over time.

During Q3 2022 we will set up the GICs for the mortgage payoff plan (waiting as the Bank of Canada is expecting to raise rates by 75 points July 15 which should bump up GIC interest rate offerings) and invest the remaining cash from the townhouse proceeds into the taxable account.

Even though I understand the magic of compound interest, it continues to amaze me.  I’m curious to see what the market does this upcoming quarter.  Do you think we can reach our FatFIRE goals before my parental leave is up in a few months?  The market would have to do a crazy rebound for that happen, which is unlikely!  We also are all our of “tricks up our sleeve” to make money appear.  Bonus season is done and rental townhouse is sold.

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 Health Savings Account (HSA), my pension from my previous employer, Nic’s small 401k from her former employer, our children’s RESP, and any CCB/CPP/SS/OAS potentially coming our way in the future.  So for the sake of this exercise we are not including them.

The key to all of this is to stay flexible.  If we see the markets tanking during the early years we have no problem tightening the spending belt and taking some staycations vs longer vacations.  We also have no problem picking up some fun part time gig for 15 hours a week to add some extra padding.  We are humans, not robots, and are capable of adjusting plans if need be.

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

What do you guys think – is the current market going to derail everyones FIRE plans?!

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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.)

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