Quarterly Net Worth Update: Q2 2023

Hey everyone!  So 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 post with our updated FIRE goals/numbers, we are aiming to get to the ~$1.26M mark in our liquid portfolio as our FatFIRE goal which equates to an annual spend of $50,400 if using the 4% rule.  We were only $6,524 away in Q1 2022 then we saw the markets slide down down down in 2022.  Let see how we compare with our goal in Q2 2023.

As of the end of June 2023, our current liquid portfolio is sitting at:

$1,305,646

Skeeeuuup!

Another big quarterly jump!  Last quarter our net worth increased by 5.1% and now we’re seeing a bump of 4.6% this quarter!

This is the crazy power of the markets, investing for the long term, compound interest, being in tune with sequence of returns risk, and keeping your withdrawal rate low.  Is this just a fluke? A 9.7% gain in 6 months is definitely strong.  We shall see what the stock markets continue do this year…

For those who use the 4% rule, this portfolio size would equate to an annual withdrawal of $52,225.

Changes This Quarter

• Really, not too much to report. I’ve been wayyy less focused on the numbers and personal finance in general and really just trying to enjoy life.
• We applied for a few new credit cards this year and once we reach the minimum spend on this current card we’re working on we will have amassed 290,000 IHG hotel points and 85,000 Chase Ultimate Rewards points in 2023.  And we have a 70,000 Hilton card in the works too.  That will set us up very nicely for our next trip and get our overall points balance over 2,000,000 points.  Thank you US credit card companies for still allowing us to somehow get approved for US cards as Canadian point options suck.
• We paid over $4,000 lump sum payments this quarter for our annual car insurance renewal and annual property taxes.
• 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

While this all sounds lovely in theory we are picking up random bits of income here and there and we won’t drain $109,000 in cash within our first 2 years of early retirement.  It’s been a year since this plan was crafted and we are still sitting on ~$101,000 in cash on hand so clearly we are currently too cash heavy.

We did not consider 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. We like to play it safeeeee. Part of me says to throw a chunk of this cash into the market.  So far we haven’t but we shall see.

Portfolio Details

Any taxable income/dividends we receive from our taxable/non-registered accounts we plan to withdraw, rather than drip right back into the non-registered accounts since we have to claim this income for tax purposes anyway.  

We also will have interest income to report over the next 2 years from our GIC mortgage payoff plan (taxed like ordinary income).

We will also withdraw from a mix of our RRSPs/taxable accounts up to the federal basic amount which is currently at $15,000/person for 2023 (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 and Kiddos Informal Trusts – GIC/HISA interest = Amount to Withdraw from RRSP/Taxable Accounts

So we each will be “earning” the Federal Basic Amount for the year ($15,000 each for 2023) as well as CCB (~$6,000 tax-free for 2023).  Alberta also launched its Alberta Affordability Action Plan which provided us with another $1,200 in tax free income ($200/month from January-June 2023). And then there’s the Climate Action Incentive Payments of ~$1,500/year for some more tax-free money. Geesh, Canada, stop being so generous! Then of course there’s the cash cushion on hand too.

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 the federal basic amount for both of us each year.  Some years we may end up withdrawing more than the federal basic amount and owe some taxes which is fine too.  But in reality, the capital gains from our taxable account are only taxed on 50% of the earnings so it should be quite easy to withdraw the federal basic amounts + the various tax-free benefits listed above coming in and living on a very healthy income for the year (for our standards at least).

If we happen to bring in any sort of additional income, we view this as gravy to the above plans and have no issues paying taxes on that.

Stocks/Bonds/Cash Allocation:

• Stocks: 85.7%
• Bonds: 4.9%
• Cash: 7.7%
• Crypto: 1.0%

(Some of this is slightly off due to currency fluctuations in my spreadsheets.  Meh.)

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 58/42 USD/CAD split.  With the USD/CAD exchange rate sitting at 1.32 our liquid portfolio fully converted into CAD is $1,563,299.

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.  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.

This upward trend in the market this quarter sure is making everything look rosier than it was last quarter – which was already looking good!  It’s pretty awesome to see that the only scenarios where we are currently over the “4% rule” is if we spend $55k+/year and not have the USD/CAD conversion in place and also assume $0 in CCB.  It is highly unlikely we will spend $55,000+ 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 ~$45,000 during our first “fiscal year” so I’m loving what we see in this chart.

Putting It All Together

Total Assets:

• Liquid Investments: $1,305,646
• GIC For Mortgage Payoff: $227,500
• Home: ~$400,000*
• Total: $1,933,146

*Our area continues to remain a hot real estate market and our house could sell for ~$500,000-$550,000 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: $240,958
• Total: $240,958

Net Worth:

$1,933,146 – $240,958 = $1,692,188

Total: $1,692,188

There we have it! Comparing this to last quarter, we were sitting at $1,647,757 so we are up $44,731 or 2.7%.  After a crappy 2022 for the markets, we’re finally starting to see a bump here in 2023.  Will it last?  Who knows what the future holds, but I sure hope so!  Comparing this figure to this time last year, our net worth was $1,546,309 so we are up $145,809 or 9.43% in a 12 month period.  No too shabby when neither of us are working our corporate jobs anymore!

Since taking time off at work in June 2021, our net worth was sitting at 1,524,413 so we’ve seen our net worth grow by $167,775. This is still just wild to me.  It will be interesting to track this number over time.

During Q3 2023 we have to unravel our year 1 GIC as past of our 3 year mortgage payoff plan.

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 pensions from my previous employers, Nic’s 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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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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