In November 2016, after having read The Wealthy Barber Returns and Millionaire Teacher, I decided to take the management of my money seriously. I wanted to get into investing. It was time to start making smarter decisions and stop wasting opportunities. I use November 2016 as my starting point – when I first invested in Index Funds, and started to look at other options around wealth management instead of just letting my money sit in low interest bank accounts. The following is a breakdown of where I started.
The Investment Plan
I had about $20,000 in liquid cash sitting in my bank accounts that I had saved up over the last year or so from doing side work on top of my day to day job. Reading ‘The Millionaire Teacher’ helped me decide that index funds would be the way to go for investing this money. I decided that I was going to use my Tax Free Savings Account (TFSA) as my main investment vehicle, and use it to invest primarily in index funds, while keeping short term savings in a high interest savings account. In addition to this money, I was also starting with the following assets:
- A RRSP Mutual Fund
- A condo bought in 2012
- A car bought in 2010
- A pension plan through my job
The Investment Breakdown
TFSA Index Funds – $12,000
I entered index fund investing with $12,000 in November 2016, and created a portfolio based on the Canadian Couch Potato recommended funds through TD Bank. After reading Millionaire Teacher by Andrew Hallam (see my review of Millionaire Teacher), I decided to create a portfolio using the following criteria:
- 31% Bonds – TD Canadian Bond Index Fund
As The Millionaire Teacher says, a good idea is to base your bond percentage on your age, slowly moving your portfolio into more bonds as you get older. - 23% Canadian Index – TD Canadian Index Fund
- 23% US Index – TD U.S. Index Fund
- 23% International Index – TD International Index Fund
RRSP Mutual Fund – $1,651.541
We all make mistakes, and we’re all not perfect. My actively managed TD Comfort Balanced mutual fund is an example of this. My investment focus is currently on growing my TFSA index funds so I have not put much focus on my RRSP. Many years ago I had saved up $3,050 in this RRSP Mutual Fund and emptied it all out when I purchased a Condo, using the Home Buyers Plan. As part of the HBP, I need to pay back all of the money I withdrew over a 15 year time frame, although it just has to be paid pack into any RRSP. I currently payback $25 per month – a very minimal amount. Currently I’ve repaid $1,450, but still need to payback another $1,600 (which I won’t receive any RRSP tax bonuses on).
High Interest TFSA – $6,615.09
This is my short term savings. My TD High Interest Savings Account pays a pathetic 0.5% annual return, but is a safe place to keep short term savings. By short-term savings I mean my emergency fund, or money for possible upcoming education costs.
Chequing Account – $2,000
This is additional short term savings. To waive the monthly fee associated with my TD chequing account, ($3.95) I keep $2,000 tucked away here, and never have my chequing account go below this number. Saving $3.95 a month in fee’s may seem small, but don’t underestimate the return on this $2,000 ‘investment’.
Property equity – $24,893.35
In April of 2012, I bought a $183,000 condo, and took out a $175,000 mortgage (condo value minus down payment) for 5-years fixed at 3.19% interest. I currently have $157,770 remaining on the mortgage, which leaves my equity at $25,230. This number makes a lot of assumptions about costs and current value of the condo, and the equity may be much higher or lower than this, but we’ll use it as a rough estimate.
Car – $9,110
I currently own a 2010 Mazda 3 that I bought brand new in 2011 (remember, I said I make mistakes) with 80,000 km on the odometer. I have fully paid the car off, and it has a Canadian Black Book resale value of $9,110.
Pension – $44,153 as of December 31, 2015
I work a job that provides a pretty good pension package that I am grateful for. Both me, and my employer contribute to it monthly, and I’ve been contributing since 2009. The pension is invested in a myriad of ways that I have little say over, and I only get an update at the beginning of the new year. As of December 2015, it was valued at $44,153.
Overall
There is definitely room for improvement in my assets and investments. Holding an actively managed mutual fund, and buying a car brand new are mistakes I’ve made in the past. But everyone has a starting point when they enter the world of investing and I’ve started to learn from my mistakes.