Oct 2018 – Net Worth

Welcome to my net worth posts where I try to prove to myself and you that I wasn’t crazy for leaving work in the fall of 2017 to start my early retirement.   A few important notes:  we are mortgage free and our goal is have our income/investment gains exceed our spending by 102% on a 12 month rolling average (the extra 2% is a buffer for inflation).

Investments

Accounts

RRSP $63,050
LIRA $17,080
TFSA $92,690
Pension $169,700
Wife’s RRSP $90,010
Wife’s TFSA $85,560
Wife’s Taxable $41,470
High Interest Savings Account $30,560

Investment Net Worth $590,120 ($24,140 decrease over last month from investments)

Home Equity

Estimate $395,000

Income

To keep things simple I’m only going to track what income comes into our main ‘house’ chequing account.  I won’t be tracking my wife’s or my businesses income as those don’t really matter until the money moves over to the ‘house’ account.  Also I won’t track investment gains since that is covered above.

  • Wife’s Monthly Payment to House: $550
  • Child Tax: $340
  • Interest $27
  • Total Income: $917

Spending

Last Month $1864

We had Thanksgiving with some family in AB (~$150) and also bought our anniversary gift ($166).

Results

Net Worth ~$985,120

This Month Investment Gains & Income/Spending Ratio = (-24140+920)/1864 = -12.45 (Target 1.02 or higher)

Nov 2017 to Oct 2018 Invest Gain & Income/Spending Ratio = (-30608+17909)/35001 =-0.36 (Target 1.02 or higher)

Commentary:

Well that folks is how you blow up a retirement plan in a two month span.  I knew this would be bad but ouch that hurt more than I was expecting.  Our investment decrease was equal to just under a year of spending cash in two months.

The other factor that kicks into play here is my ratio is based on a 12 month average so I just stripped out the results of Sept and Oct 2017 which were really good so that made the results look even worse.

But on the plus side the actual decrease this month was only just over 4% overall this month.  It just seems bigger because of the numbers involved. The other good thing is this is just a paper loss we didn’t actually sell anything.

So now what?  Well in the short term, nothing much changes.  I keep working on the sequel to  the Free at 45 book so I can publish it in 2019.  I keep my ear out for interesting opportunities like a local brewery looking for some causal help which I put my name in for.  And hopefully next month gets better.

Any questions?

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Sept 2018 – Net Worth

Welcome to my net worth posts where I try to prove to myself and you that I wasn’t crazy for leaving work in the fall of 2017 to start my early retirement.   A few important notes:  we are mortgage free and our goal is have our income/investment gains exceed our spending by 102% on a 12 month rolling average (the extra 2% is a buffer for inflation).

Investments

Accounts

RRSP $65,570
LIRA $18,050
TFSA $96,200
Pension $173,350
Wife’s RRSP $93,660
Wife’s TFSA $90,650
Wife’s Taxable $45,250
High Interest Savings Account $31,530

Investment Net Worth $614,260 ($5590 decrease over last month from investments)

Home Equity

Estimate $395,000

Income

To keep things simple I’m only going to track what income comes into our main ‘house’ chequing account.  I won’t be tracking my wife’s or my businesses income as those don’t really matter until the money moves over to the ‘house’ account.  Also I won’t track investment gains since that is covered above.

  • Wife’s Monthly Payment to House: $550
  • Child Tax: $340
  • Interest $30
  • Total Income: $920

Spending

Last Month $3492

Fairly normal spending but included the yearly car insurance for $1026.

Results

Net Worth ~$1,009,260

This Month Investment Gains & Income/Spending Ratio = (-5590+920)/3492 = -1.33 (Target 1.02 or higher)

Oct 2017 to Sept 2018 Invest Gain & Income/Spending Ratio = (9641+18472)/36943 =0.76 (Target 1.02 or higher)

Just a note on the multiple month ratio I stripped out all income related to my old job from the early months to provide a more realistic picture for retirement.

Commentary:

Well I was avoiding writing these posts because I knew the results would not be good. Yet dropping from 1.08 ratio to 0.76 in a month isn’t good.  But this is what a few bad months in a row can do to your investments.  Next up Oct and the blood bath results.

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The Stock Market Melted, Now What?

Well that was interesting.  I generally ignore the stock markets most of the time except for my monthly net worth posts where I login to my accounts and check the balances.  Yet even the current media coverage on the stock market decline managed to pierce my fog of ignorance a bit earlier in the month than I’m used to.  So yes, the TSX index is down like 10% or more from its recent peak.

First off, I don’t panic. In fact, I go back to my previous notes about my emergency plans and what the trigger is.  You know that plan you wrote down when things were going well and you were calm and rational…unlike now where your mind seems to be moving like a squirrel on a double espresso.  And there is black and write is my trigger point which is 10% decline in our portfolio, so while my TSX index is down over 10% I will need to check if my portfolio is down that far yet.  Given my bonds I doubt that the damage will be that bad but I will confirm that tomorrow.

Yet the timing of this does suck.  I was supposed to be re-balancing my portfolio next week and selling some investments to provide cash for next year.  So what do I do?  Well looking at my emergency plan the answer is simple: nothing.

Pardon?!? Yep, the answer is I’m doing nothing.  I’ll just sit back and wait until the US mid-term elections are done and the world just calms down a bit.  In the meanwhile I still have lots of cash in my savings account to live on in the short term and that gives me time to push off pulling money out of my investments until later on in November.  Of course the delay is more psychological than real as I will be pulling money out the bond part of my RRSP.  What I’m really delaying is the re-balancing of my RRSP accounts as I don’t want to re-balance to a stock market blip that will put my off my planned percentage split of investments five minutes after I finish the transactions.

So I might be “missing a buying opportunity” or “trying to time the market” by delaying my re-balancing but the fact is I wrote out a plan back when I was much more calm which said this: when your portfolio goes down 10% or more than you trigger the emergency plan.  Don’t sell investments.  Sit down, take a deep breath. Cut back on optional expenses (if you feel the need to do ‘something’).  Use your slush fund to pay expenses in the short term (if required).  Keep the long view and consider your options: perhaps pick up some part time work or a contract position and consider using debt as a medium term measure if the decline goes on a for an extended period of time.  Keep in mind, you are in this for the long run so don’t do anything stupid in the short term.  Sit on your hands if you have to but DO NOT touch that ‘sell’ button.

See “rational past me” knows “stupid panic current me” very well and wrote out just what I needed to hear: don’t do anything.  Sit tight and if you need to do something work on something to give you some income or perhaps look at your spending in the short term to give yourself a sense of control in a chaotic time.

That is the real value of writing out an investment plan.  It doesn’t have to be long or complex but it should be your ‘go to’ document when things hit the fan and you don’t know what to do.    So what does your investment plan say to do right now?  Or how are you reacting or not to this stock market decline?

A blog about early retirement and happiness