June 2014 – Investment Update

The following is an update of Tim’s plan to retire early.  Please note we are mortgage free, and the house equity isn’t part of the retirement plan.

To track my progress I’ve decided to track both my expenses and my investment gains.  So once the investments gains are consistently beating my expenses I’m financially independent and can stop working.  I use a trailing 12 month average on spending (but excluding vacations) and a trailing 12 month average on investment results.


Account (Contribution), [+/- Gain or Loss less contributions]

RRSP $38,100 ($100), [+$0]
LIRA $14,350 ($0), [+$220]
TFSA $45,400 ($0), [+$150]
Pension $99,090 ($1100), [+$690]
Wife’s RRSP $61,420($3000), [+$0]
Wife’s TFSA $40,790 ($0), [+$730]
High Interest Savings Account $1430 (-$2700),[+$0]

Investment Net Worth $300,600 ($1500), [+$1790 or +0.6%]

(YTD Contribution: $29,332), [YTD Gain: $14,798 or +5.2%]

Average Monthly Gain (12 month rolling) $2767


Last Month $5047

This month included my $3300 annual property tax bill, plus I bought a wine kit for $180.

Trailing Last 12 Month Average $2491


Number of months trailing average spending covered by trailing investment gains: 1.1 {Target 1.0 or higher}

PF Score: 23.4  {Target 32}

Net Worth ~$700,600


Ya, we passed the $300K milestone for investments! Also I’m so close to crossing the $100K mark for my work pension as well, oh well, that should occur next month.

You might also notice our spending is way up this month.  This is a normal event for us as several large bills come due during the summer (house insurance and property tax).  But overall the trailing 12 month spending is stable, so I’m not worried.

Now onto the somewhat major shift in our results, the fact we were financially independent for the last 12 months.  Yes, my investment gains exceeded our spending and ironically we have likely been in this state for a while as I found an error in my formula that calculated our 12 month rolling investment gains.  I had only picked 11 months instead of 12, so this has likely been the case for like six months or more.  I haven’t back calculated to confirm when this occurred yet.

So does this mean I’m quitting work? NO WAY IN HELL!  Just because the one metric looks good doesn’t mean this is sustainable, it just means we have had a low spending year and a high investment gains.  Which is why I also introduced the PF score to help keep the longer tend in mind.  Regardless it is a good feeling to know we are on the right path.

Any questions?

(click to make bigger)

Investment Net Worth June 2014

7 thoughts on “June 2014 – Investment Update”

  1. How did you get so much in your TFSA? I’ve been maxing it every year but with interest rates so low, I have just over $32,000. Have you been buying TF-GICs? Sorry if this is a stupid question. Still learning.

  2. Tim must have invested his TFSA in stocks and either he already cashed in for handsome capital gains or the value of the yet unsold stocks went up nicely.
    BTW, Tim, I forget, but what kind of company pension do you have, defined contribution?

    Defined contribution is correct – Tim

  3. Capital appreciation vs expenses is not a good metric for deciding on whether or not you can retire. If your capital appreciates 30k in a year on top of a 300K principal and your expenses are 28K in a year you’d only be ahead 2K and you would be paying capital gains tax. It is best to create a portfolio that pays out a dividend and never touches the principal. For example, a portfolio of 500K with a 5% dividend pays 25K per year and you never touch the principal. Your principal can go up 10% in a year (maybe use that for special spending but no all) and ideally the dividend paying stocks will do annual increases in their dividends. Also, dividends paid at less than I think 39K per year are not taxed if that is your only income.
    Create a dividend paying portfolio and you’ll never need to touch the principal and not need to worry about 10-20% swings in the markets.

  4. I agree with Gene. My ER plan was to set up an income stream consisting of dividends which would cover my expenses without having to touch principal. In fact, I built into my plan an excess of dividends over expenses so I could add to principal over time, like a mild inflation guard. This excess, or buffer, may also be spent on things once in a while or simply cover any small, unforeseen expenses I may encounter.

  5. I think it depends on the person – some people are dividend growth investors and some are total return or indexers. I’m kind of a hybrid myself, but you don’t really know until the rubber sort of meets the road what you want to do. And it can change. The assurance of dividends is nice, but it definitely limits your investing options if that’s your primary focus. My TFSA has grown the most this last year being in gold mining companies paying low or no dividends. It’s nice to add a little excitement here and there.
    Having said that, I didn’t feel comfortable myself calling it quits on work until the dividends matched the monthly spend and even trial-budgeted it for a year or so while working just to get used to the income flow.

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