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 mentioned in a post a few weeks ago, we set up a GIC ladder to arbitrage our low mortgage rate vs current GICs rates over the next 3 years.  With that in place, we now have money set aside to pay off the mortgage in 3 years so we are not going to include the mortgage balance and GIC balances as this is basically a wash and instead will focus on the investment portfolio.

As noted in our post with our updated FIRE goals/numbers, we are aiming to get to the ~$1.26M mark as our FatFIRE goal.  We were only $6,524 away in Q1 2022 and we’ve now seen the markets sliding down down down in 2022 so now we are nowhere as close.  Let see how we compare with our goal.

Our current liquid portfolio is sitting at:

$1,167,562

Not terribly far away but with giving up our steady paycheque and no longer receiving EI from parental leave it’s highly unlikely we will get to that $1.26M number, which is ok!

For those who use the 4% rule, this portfolio size would equate to an annual withdrawal of $46,702.

Changes This Quarter

  • As noted above, we set up our GIC mortgage payoff.  This will bring us an extra $6,000/year for the next 3 years.
  • We shifted ~$75,000 of VUN (US unhedged) to VUS (US hedged) in our RRSPs seeing strength in the US dollar.  (Using a registered account so not to have to deal with any capital gains to report.) This means we are basically making a bet that the USD/CAD will come down over time.  It is currently valued around 1.36.  If we shift back to VUN when the exchange rate is 1.30 we magically will make an extra 6% ($4,500 of our $75,000).  Conversely, if the USD continues to gain strength and we shift back to VUN when it is at 1.42 we will lose out on 6%.  I wrote a post 2.5 years ago about currency exchange rates when the USD showed a big jump when COVID hit for those curious to learn more.
  • Keeping on the currency exchange train, we also are in the process of shifting $20,000 USD from our US chequing account to ~$27,000 CAD.  We are doing this via our Charles Schwab checking account which allows for $0 ATM fees world wide.  We simply go to our local ATM, withdraw $1,300 CAD per day (limit is $1,000 USD/day), take that cash and deposit it right back into our Canadian chequing account. It’s a pain but our bank is right next to Finn’s preschool so we kill two birds with one stone after drop off.
  • We invested the remaining $40,000 of the townhouse proceeds into our taxable account.  We also sent this extra $7,000 from the USD/CAD shift mentioned above to our taxable account too.
  • Here is our cash plan for the next two years:
    • $16k for year 1 monthly mortgage payments
    • $35k for year 1 spending
    • $35k for year 2 spending
    • $6.5k for year 1 TFSA contribution
    • $6.5k for year 2 TFSA contribution
    • $5k for year 1 RESP contribution
    • $5k for year 2 RESP contribution
    • Total: $109k cash

We currently have ~$118,000 in cash so we will deploy another $9,000 to the markets during Q4.  Note we are not considering any CCB coming in or coaching clients or any other one off income that may come our way that will likely lower the amount of cash we actually need on hand.

Portfolio Details

Starting in 2023, any taxable income/dividends we receive from our taxable account we plan to withdraw, rather than drip right back into the non-registered accounts.  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).

So the math looks like this for both Nic and I:

Federal Basic Amount – Income/Dividends from Taxable Accounts – GIC interest + CCB income = Amount to Withdraw from RRSP/Taxable Accounts

Each year we will see what the equation looks like and decide how much to pull from our RRSPs vs taxable accounts to get our total cash to $40,000 for the year in the most tax efficient way.

Stocks/Bonds/Cash Allocation:

  • Stocks: 83.1%
  • Bonds: 5.4%
  • Cash: 10.2%
  • Crypto: 0.7%

I actually really like this set up.  Slowly the bond and cash percentage will go down and our plan is to glide back to ~90% equites over time.

We’re currently sitting at a 59/41 USD/CAD split.  With the USD/CAD exchange rate sitting at 1.36 our liquid portfolio fully converted into CAD is $1,416,640.

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.

Even with all the market craziness of 2022, 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 $60k/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: $1,167,562
  • GIC For Mortgage Payoff: $227,500
  • Home: ~$400,000*
  • Total: $1,795,062

*Our house could sell for ~$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: $249,314
  • Total: $249,314

Net Worth:

$1,795,062 – $249,314 = $1,545,748

Total: $1,545,748

There we have it! Comparing this to last quarter, we were sitting at $1,546,309 so we are down $561 or 0.03%.  Really not much change.  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 $1,551,483 so we are down $5,735 or 0.3% in a 12 month period.

Since taking time off at work in June 2021, we’ve seen our net worth grow by $21,335.  This is still just wild to me.  It will be interesting to track this number over time.

During Q4 2022 we will reach out to our brokerages to request the DRIP setup to be turned off for our taxable accounts starting in 2023.  We will also hopefully find a renter while we are gone in Portugal for 2 months to help offset those costs (future post will all the Portugal numbers). I also need to figure out how to access my DC pension plan from my previous employer and get my vested RSUs and shift that all into self managed accounts.

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.

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!

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