{"id":2419,"date":"2020-04-22T23:32:44","date_gmt":"2020-04-23T05:32:44","guid":{"rendered":"https:\/\/modernfimily.com\/?p=2419"},"modified":"2021-07-27T22:49:36","modified_gmt":"2021-07-28T04:49:36","slug":"quarterly-net-worth-asset-allocation-update-q1-2020","status":"publish","type":"post","link":"https:\/\/modernfimily.com\/quarterly-net-worth-asset-allocation-update-q1-2020\/","title":{"rendered":"Quarterly Net Worth Update: Q1 2020"},"content":{"rendered":"
I think you’d be living under a rock if we said Q1 2020 was a bit volatile for the markets and you didn’t know what we were referring to. \u00a0Dips will happen.\u00a0 They are expected.\u00a0 We were a part of the longest bull run in the history of the stock market.\u00a0 The market was over valued and due for a correction.\u00a0 I don’t think anyone would have guessed the drop would have been due to a pandemic virus that has spread globally.<\/p>\n
Is the worse still to come for 2020?\u00a0 Are we back on the upward climb?\u00a0 Who knows.\u00a0 No one.\u00a0 No one knows what’s going to happen and when it will happen.<\/p>\n
But that’s the point behind this all.\u00a0 The market is volatile.\u00a0 We can’t predict the future, all we can do is invest in our future knowing that over time<\/span>, the market will go back up.\u00a0 All we know if that if you ignore the noise, take out the emotions, continue to earn more than you spend, and consistently invest the difference, your portfolio will go up over time.<\/p>\n Just like in our previous quarterly updates<\/a>,\u00a0we are going to break down exactly where our current investments live for our Q1 2020 update.<\/p>\n How have we done in the past three months? How do we compare to our FIRE number? Did we make up that $45 gap from last quarter and reach our FIRE number?\u00a0 Spoiler alert… ummm NOPE!<\/p>\n As of April 3, 2020 here is a breakdown of our liquid assets (home and car not included as these are illiquid!):<\/p>\n <\/span><\/p>\n \u00a0<\/span><\/p>\n We also still have a mortgage in place that will be murdered by the time we retire (see below for more info regarding our mortgage plans). Currently there is $49,934\u00a0remaining here. So here\u2019s the total amount of our passive net worth:<\/p>\n <\/span><\/p>\n <\/p>\n Since we are so close to our FIRE date, we are holding quite a bit more in cash than we normally would.\u00a0 Do you guys NOW get why we are SO conservative and want all this cash on hand?! Sequence of returns risk is something you should be taking into account as you approach your FIRE date!\u00a0 Our overall breakdown is:<\/p>\n <\/span><\/p>\n <\/span><\/p>\n 25.4% in cash, 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.\u00a0 Now that we are approaching our FIRE number, we are being SUPER cautious and do not want to be heavy in stocks.\u00a0 I\u2019m 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<\/a> – ahem, coronavirus. We are SO thankful to be in this conservative situation given the current market conditions.<\/p>\n 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.\u00a0 Seeing that we are now only 52.6% in stocks is a sign that I need to rebalance even more into stocks over the next few months.\u00a0 The game plan is to transition via a glide path to that higher stock allocation over the next 5-10 years.<\/p>\n Our goal is to retire early in approximately a year from now – it may be longer at this point, and that’s totally ok as we’ve designed a very happy life living on 50% of 1 part time income.\u00a0 Ideally, it will be April 2021 as I receive my annual bonus in March each year (if one even comes for 2020) but the end goal is for it to match up with hopeful babes 2 arrival so that we can utilize Canada\u2019s 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 we will still be covered with my employers health coverage during that time frame too thus eliminating the need to get supplemental insurance for dental, vision, and prescriptions at the beginning.<\/p>\n Many people are joking these days about a baby boom that will be happening in 9-10 months from now with everyone stuck at home.\u00a0 However, for those of us who need fertility treatment to conceive we are in the exact opposite<\/strong> situation.\u00a0 Our plans to try to conceive baby 2 have been put on hold at this time until the fertility clinic doors open up again.\u00a0 So it’s likely that babes 2 will not be arriving before April 2021 at this point in time which will push out our ideal FIRE timeline, (as will our portfolio performance likely will too).<\/p>\n Over the next year $49,934\u00a0of 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\u2019s another $25,000 out of the checking account. So with the\u00a0$210,385 we have in cash now we can expect to have ~$135,451\u00a0in cash remaining ($210,385-$49,934-$25,000) when we FIRE. The majority of this cash sits in our Motive Savvy Saver high interest savings account<\/a> earning 2.2% interest and will provide us with more than enough of a cash cushion in our first few years of early retirement. So our cash portfolio isn\u2019t necessarily doing nothing for us this whole time. This is still too much cash than what we want on hand so the plan is to throw extra into the markets over the course of the year to take advantage of this buying opportunity we are seeing.\u00a0 So far, we’ve sent about $10,000 in cash into stock index funds and another $15,000 of bonds over to stock index funds and it looks like there’s still more rebalancing to come to get us to our ~60% stocks figure.<\/p>\n To dig even further, here is a breakdown of the different accounts we have our non-cash investments in:<\/p>\n That\u2019s it!\u00a0 Some acute FImily followers may realize that we made some changes to our allocation over the last quarter.\u00a0 What did we do?<\/p>\n Here\u2019s a chart with the breakdown:<\/p>\n <\/span><\/p>\n 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:<\/p>\n For my visual learners, the chart below depicts how heavy we are in US index funds. A large majority 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 and about 57% of XAW tracks the S&P 500). As planned, we are making some adjustments this year to get ~10-20% of our portfolio in international funds.\u00a0 Last update we were 8.36% international and now we are actually down at 7.35% international.\u00a0 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.<\/p>\n <\/span><\/p>\n 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 a previous post outlining our FIRE number<\/a>, we are using currency arbitrage to keep our safe withdrawal rate below 4%.<\/p>\n As of this writing, 75% of our accounts are in USD and 25% are in CAD. If we converted all USD to CAD based off today\u2019s exchange rate of 1.40 (WOO!), we\u2019d be looking at a total of $1,010,406\u00a0CAD in our investment accounts.<\/p>\n Assuming $35,000 in annual expenses, this puts us at a 2.38% withdrawal rate.\u00a0 If we bumped up our expenses to $37,000 it would be a 2.57% withdrawal rate.<\/p>\n We also have the Canadian Child Benefit working in our favor which brings our withdrawal rate to the low 2% range.<\/p>\n For those who have been following along, you know that our FIRE number is $875,000.<\/p>\n So let\u2019s do some simple math: Last quarter, we were $45 away from our $875,000 goal<\/a>.\u00a0 Now, we are back on the climb – which I was anticipating for 2020 hence why I didn’t jump ship once we crossed our FIRE number earlier in the year.\u00a0 We’re actually quite close to our Q3 2019 figure<\/a>.\u00a0 While some may see this as a depressing stat, I’m actually REALLY happy this dip\/bear market\/recession is taking place while I am still working.\u00a0 Knowing that we are NOT withdrawing from our portfolio at this time and instead saving\/investing 50% of my income is allowing me to sleep very well at night.\u00a0 The conservative Clancy in me may decide to wait to pull the plug until we see a rebound in sight (which we’re actually seeing this month but I’m still quite weary).\u00a0 However, Nic will likely not let that happen as she has a much more positive outlook on our portfolio.\u00a0 Time of course will tell, so who really knows what’s in store for us. I’m very happy to be working part time at this time as I already feel like I’m living the retired life<\/a><\/span>.<\/span><\/p>\n 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 two cars are valued around $12,000 (with the $10,000 in our car fund not being counted). Of course we will not know the true value of these illiquid assets until we actually sell them down the road.<\/p>\n Adding these two figures into our net passive investments of $777,666\u00a0above gets us to a total net worth of: 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, our child\u2019s RESP, any CPP\/SS\/OAS\/GIS potentially coming our way in the future, and our car fund so for the sake of this exercise we are not including them.<\/p>\n Voila! Stay tuned to see how our net worth has changed in 3 months when we check back in on this.<\/p>\n 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?\u00a0 If so, how often do you check in on your accounts? As always, thanks for tuning in and comment below\u00a0<\/p>\n If you liked this article and want more content like this, please support this blog by sharing it.\u00a0 Not only does it help spread the FIRE, but it lets me know what content you find beneficial.\u00a0 Writing is NOT my strong suit and it honestly takes me hours to write each post so the more encouragement the better!\u00a0 Engaging in the comments below keeps me motivated.\u00a0 You can also support this blog by subscribing to receive emails anytime a new post is published.\u00a0 Thank you FImily!<\/p>\n We believe in stacking up life hacks to keep your enjoyment levels to the max without depleting your bank account.\u00a0 Here are some ways to further educate yourself and save thousands of dollars over your lifetime by making some simple adjustments:<\/p>\n I think you’d be living under a rock if we said Q1 2020 was a bit volatile for the markets and you didn’t know what …<\/p>\nA Look Into Our Liquid Assets<\/h2>\n
Any Liabilities?<\/h2>\n
Hold The Phone.\u00a0 We Have How Much Cash?<\/h2>\n
What Are We Planning To Do With All Of This Cash?<\/h2>\n
What Do We Invest In?<\/h2>\n
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What About Currency?<\/h2>\n
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Where Do We Stand?<\/h2>\n
\n$875,000 \u2013 $777,666 = $97,334<\/p>\nOur Net Worth:<\/h2>\n
\n$1,104,666<\/p>\nSupport This Blog<\/h2>\n
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