April has turned out to be one of the best months of the year so far. 😀
-Stock markets climbed roughly 2% in Canada and the U.S. (27% annualized return)
-The bond market is paying higher interest rates. Great for new fixed income investors. 🙂
-Real estate market continues to stand strong. What bubble? 😛
-Canadian dollar strengthens against other currencies such as the USD & Euro. This means more purchasing power for fellow Canucks.
-FCC released its annual farmland report which states Saskatchewan farmland value increased 18.7% in 2014, more than any other province!
All this growth in the markets simply equates to a $40K+ increase to my existing financial assets. Holy pumpernickel! There has never been a better time to be a diversified investor in the North American economy. 😀
I will be updating my farmland values in this month’s net worth update. As usual I’ll use a 50/50 blend of the CPI inflation rate of the previous year (1.9%) and Farm Credit Canada’s report to revalue my farmland. Thus, the average increase is 10.3% or about $38,000 more!
* Side Income:
- Part-Time Work = $600
- Dividends = $600
- Selling Options = $0
- Fun = $300
- Debt Interest = $1500
*Net Worth: (MoM)
- Assets: = $898,500 total (+43,100)
- Cash = $4,400 (+900)
- Stocks CDN =$96,500 (+3000)
- Stocks US = $59,400 (+700)
- RRSP = $53,200 (+500)
- MICs = $15,000
- Home = $259,000
- Farms = $411,000 (+38000)
- Debts: = $512,600 total (-2,500)
- Mortgage = $194,300 (-300)
- Farm Loans = $201,600 (-500)
- Margin Loan CDN = $29,200
- Margin Loan US = $25,200 (-700)
- TD Line of Credit = $28,600 (-400)
- CIBC Line of Credit = $10,000
- HELOC = $18,200
- RRSP Loans = $5,500 (-600)
*Total Net Worth = $385,900 (+$45,600 / +13.4%)
All numbers above are in $CDN. Conversion rate used: 1.00 CAD = 0.82 USD
Over the past 7 years I have been very fortunate to accumulate $400,000 of wealth starting from a negative net worth. But of course not everyone can be so lucky. Here are the 3 major factors that I credit to my current financial situation.
- Low interest rates. – When the expected return of a balanced basket of investments is 8%, and money can be borrowed at 4% or lower, there’s a really good chance that over time borrowing to invest will net a positive outcome.
- Market Timing. – Dow Jones and the S&P 500 U.S. stock market indexes doubled in value since 2008. Farmland in North America, Europe, and Australia have also soared. Housing market is also much more expensive now than in 2008, especially in cities with growing a population like San Francisco, Vancouver and Toronto. The last 7 year period has been nothing but good fortune. 😀
- Leverage. – By borrowing to invest the returns can be multiplied by 5 or 10 times. If this continues it means one can retire in 8 years or less of working and saving instead of 40 years.
It’s imperative to realize that all 3 things in this list have to happen simultaneously for rapid wealth creation. Number 1, cheap money, is what gives me the ability to take on investment debt without struggling with high debt servicing costs. Number 2, the bull market, is what makes Number 3, Leverage, work so darn well! On the other hand purchasing assets in a bear market would be a nightmare. 5 times leverage means losing 50% of one’s investments when the market only drops 10%.
Today, about 20% of working Americans work at part-time jobs. And most households are living paycheck to paycheck. Not only has employment benefits shrivelled up, but the portion of employees with workplace pensions has also fallen over the years. When it comes to financial support young people are in most trouble. 34% of those aged 25 to 34 have less than $1K in any type of savings, including retirement accounts, according to the Employee Benefit Research Institute.
My plan is to continue building up my investments until I have over $1 million and become financial free. Your’s could be something different. But it’s important for everyone to have a retirement plan. If we don’t have our own plans, than we’re going to become a part of someone else’s.
Random Useless Fact: