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:
Almost hitting the $400k mark! That’s truly amazing in 7 years. If you put your mind to it, you shall conquer. Your freedom 35 certainly seems plausible now! You got another 7 years left? By then, I’m certain you’ll reach a million!
Yup, another 7 years and I’ll be 35. Time sure flies when you’re having fun. 🙂
Congrats on the monthly increase. The 10.3% estimated increase in the farms values is spectacular.
Thanks. 🙂 I’d rather take a $38K increase in capital appreciation than a $38K bonus from work because of the better tax treatment that comes with investment gains over earned income.
Very impressive increase. Congrats!
Cheers, mate. This will probably be my best month all year. 🙂
Wow, you have an impressive month! Congratulations!
Congrats on the huge month! I think your stats are slightly skewed though since the farmland appreciation was cumulative over the previous year wasn’t it? You’re only just recognizing it in this month, which I think would go against GAAP if I’m not mistaken? Your shareholders would lose faith! haha, I kid, except on the congrats!
Yeah, I think you’re right. Maybe I should hire someone to reassess my farmland and real estate. But then again, given my financial management style my accounting wouldn’t be the only thing that’s not generally accepted, lol.
Haha, very true! If you can tolerate the risks, why not take them right! Good luck on the farmland, what ever turned you on to the farmland anyway?
I was watching a show on BNN and saw one of their guests talk about AgCapita, an investment company that issues farmland funds. So I did some further digging on the internet to research what the company does and ultimately decided to buy farmland directly for myself so I don’t pay the 20% from all profits, plus the 2% annual management fee.
Would you say it’s your best investment to date? This past year alone has been very good to you on appreciation and its paying for itself isnt it? Or even better, cash flow positive?
In the beginning the cost was about $4000 more than the income I was making. After a couple of years I now lose only $1500 a year on my farm from a profit/loss point of view. The interest I pay to the bank and property tax is about $10,000 today, and I make about $8,500 from rental income.
I don’t expect to have a net positive income until 2017. And don’t expect positive cash flow until 2020 lol.
But despite all that, it’s still the best investment I’ve made to date simply because of the tens of thousands of dollars worth of annual capital appreciation it has given me. Plus, capital gains are taxed less than rental income so that’s nice too. 🙂
I am turning green on your accomplishments 🙂
Thanks. There are a lot of readers who look forward to the day when the market goes into a correction and they’ll watch in excitement as I try my best to keep my head above water. We’ll see how my accomplishments hold up then. 😉
Wow nice increase !
Any plan to sell some farmland and cash in your gain or do you expect more upside ?
I still see growth in farmland value over the long term, especially if interest rates continue to stay low for the foreseeable future. I try not to time the actions of Central Banks. I just go with the flow. I will hold onto my farms for now because debt is cheap. I also don’t need the cash any time soon so it’s better to hold my money in the form of land rather than sitting in a bank account.
[…] 35 @ $744,546 ($898,500 […]
That’s an incredible jump in one month. Congrats to you. Of course, not to be a Debbie Downer, we should be more focused on our income generation via dividends, options, premiums, lending, rent, etc. rather than overall net worth growth. While nice seeing a rise in our net worth it’s nicer seeing a growing income stream without having to sell any assets. Thanks for sharing.
Right you are. 🙂 The ultimate goal is to create that stable stream of income. That’s what I plan to do some day as I sell my farmland and dump the proceeds into a diversified mix of dividend stocks and bonds. 😀
The last 24 months have been amazing. I’m really surprised there hasn’t been any sharp corrections in the market for so long. Knock on wood though lol.
You are doing really well! However the market is getting quite high again. Do you plan to sell before a correction or just ride it out when it happens? And how would you deal with the leverage at that point? I’m not criticizing, just very interested as I’ve considered investing with leverage in the past. I just worry what would happen in this scenario.
Hi Carla. I plan to ride out any corrections as long as interest rates stay relatively low. 🙂 But if I lost my job or something then I would probably sell some of my investments to de-everage regardless of interest rates because carrying a lot of debt without a full time income is quite risky. But assuming I don’t lose my job, and credit continues to be cheap and abundant I’ll just keep my current level of leverage for the time being even if the market makes a large correction. I think about money like this: What is the expected return on my investments on average? If the stock market p/e ratio is 17 times then the expected return is (1/17) or about 6%. My average borrowing rate is about 3.5% on my debts. This gives me a 2.5% margin of safety. If all things stay the same in the economy, I’ll have 2.5% more money by this time next year. But if interest rates or the stock market’s p/e ratio rise, then I will pay down debt accordingly. The ironic thing is during market corrections the p/e ratio is usually very low, which makes it more desirable to use… Read more »
Congrats on the amazing progress. Although I am quite curious, why there is no similar inflation on the groceries, if farmland went in price by 18.7%. Surely, there is a correlation.
I could not wait till your retire at 35, to enjoy the outcome of hard work you put in.
[…] $38K – Farmland appreciation. I adjusted my farm’s price by a conservative +10% for 2015. […]