Wow, a quarter of the year had flown by and it just seemed like yesterday that I wrote my first public net worth performance review. As I mentioned in my 2016 year end net worth performance review, every quarter end is an exciting time for me (yeah, I know. I am such a number geek.) as I love to tally the numbers and review my net worth. Now that I am on the journey to save my second million dollars, it seems a bit more adventurous and fun comparing to my first journey, which was quite boring. Similar to my first net worth performance review, I will reflect on the following areas: savings, real estate, debts, investments and net worth performances. I will share my successes and failures with you so that I hold myself accountable for my decisions and we can all learn from my shared experience.
In order to grow your money, I believe that you have to develop the discipline to save money first. To develop my saving discipline I need to ensure that all of my annual financial goals are achieved on a yearly basis. My annual financial goals for 2017 are to maximize my family’s Registered Retirement Saving Plan’s (RRSP) contribution room, maximize our Tax Free Savings Account’s (TFSA) contribution room and maximize the Registered Education Saving Plan (RESP) grants for both of my kids. On top of that, I want to start to accumulate more family experiences with my family by adding a vacation fund on top of the other three saving goals.
My 2017 family saving goals
Based on the table above, I can proudly say that we are on track to achieve our all of our financial goals this year. By maximizing the contribution to our TFSA and RESP accounts in January, that money can start to grow early. On top of that, we received $1,000 of free money (the maximum of 20% of our RRSP contribution) in education savings grant from the government. We also have an automatic 6% contribution to our work’s Employee Share Ownership Plan (ESOP) for every pay cheque. This automatic contribution is working twice as hard for us as we get a 3% matching from our employers and it’s also counting toward our annual RRSP contribution limit. By maximizing our RRSP contribution limits, we are not only saving money, we are also getting a great tax refund at the top of our tax brackets.
To ensure that more of our money are working hard for us, we directed all of our bonuses for 2016 to our RRSP accounts. Those decisions benefited us in several ways. The government has never gotten to tax that money as bonus tax sucks. We had access to invest those bonus money right away. Our savings got a huge boost without much effort from us. We get more tax refunds as we also directed that money to our RRSP accounts. As a result, I believe that this category deserves a meet expectation.
Real Estate Performance
If you’ve read a recent post that I made to emphasize the importance of doing your research when you invest in real estate, you’ll know that the real estate market in the Greater Toronto Area (GTA) is burning hot. In addition, I was trying to increase my real estate holding with a purchase of a unit in a hot pre-construction condo project. The plan did not end well as I was not able to purchase the unit that I want at a fair price. Hence, I chose to walk away instead of being ripped off by the developer.
For the past two months, I was spending quite a few weekends at my rental house and also took a few days off work to update the property to meet the city’s fire code. This period was quite challenging as I needed to juggle my full-time work, family life, volunteering at the Autism In Mind Children’s Charity, renovating my property, real estate business and blogging. My stress level was going through the roof, but I was really happy and relieved that my hard work paid off as my property passed the inspection. Even though there were not many changes in my real estate portfolio, the improvement that I made to my rental property and the prudent approach that I took to not overpaid for properties deserves an exceed expectation rating.
There hasn’t been a lot of activities on this front. I had been paying all my credit card bills in full every month, paying my mortgages on time and did not incur any additional debts. One good thing that resulted from these boring activities was that I was slowly building more equities in my properties. So I’ll give this boring category a borderline meet expectation as I don’t think I’ll be doing much in this category for the near future. Maybe another round of refinancing to borrow more money to invest.
The investment category had always been the most exciting for me as I spent a lot of time to try to improve my performance, lower risks, earn free money and pay less taxes. Recently, I’ve added a new item to my to-do list – generate more passive income. One of the obvious methods is to buy companies that have a great history of increasing their dividends. The other is to continue to write/sell more naked put options (stop your wandering mind, it’s not that kind of naked) on stocks that I want to buy or covered call options on stocks that I already own. If you are interested to learn more about options, check out my options basics post.
I manage about 15 investment accounts, which includes family and friends’ accounts. Whenever there is a stock that I want to purchase, I tend to spread the purchase to different accounts where I see fit. For my own accounts, I am actually taking a lot more risks than other accounts and I am continually refining my strategies. For other accounts, I tend to take a more conservative and cautious approach as I need to be more prudence with other people’s money. I am a little jealous that some of the accounts have a better rate of return than mine.
|Option – Contracts||Ticker||Expiry Date||Strike Price||Premium||Status||Return|
|Covered Call – 1||CMG||January 19,2018||$600.00||$1629.00||Active||+39.33%|
|Covered Call – 4||MCD||January 20,2017||$135.00||$1,484.00||Expired||+100%|
|Naked Put – 2||EXR||March 17,2017||$80.00||$928.00||Executed||-30%|
|Naked Put – 2||GS||January 20,2017||$135.00||$1,597.52||Expired||+100%|
|Naked Put – 5||KO||January 19,2018||$38.00||$1,150.00||Active||+43.09%|
|Naked Put – 3||WFC||January 20,2017||$43.00||$646.29||Expired||+100%|
|Naked Put – 3||WMT||January 19,2018||$65.00||$1,335.00||Active||+33.41%|
Options sold during 2016.
Last year, I mentioned that I wrote seven options. Three options (GS, MCD, and WFC) expired worthless this past January, so I made a few bucks in free money. Three more options (CMG, KO, and WMT) still have about 10 months to go before they expire on January 2018. I will be more than happy to buy the stocks if the price of those stocks on the put options ever dropped below the strike price and to sell the stocks if the price of the stocks on the covered call options moved above the strike price. The last of the seven options was a naked put option for EXR which I need to purchased because the price dropped below $80 in March of this year. For this transaction, I am currently losing a few dollars per share. Overall, my options were performing well.
|Option – Contracts||Ticker||Expiry Date||Strike Price||Premium||Status||Return|
|Covered Call – 2||CAT||January 19, 2018||$110.00||$628.00||Active||+42,68%|
|Covered Call – 4||MCD||January 19, 2018||$140.00||$764.00||Active||-17.80%|
|Covered Call – 5||WFC||January 19, 2018||$65.00||$965.00||Active||+52.33%|
|Naked Put – 5||ENB||January 19, 2018||$50.00||$935.00||Active||+30.48%|
|Naked Put – 3||MRU||September 22, 2017||$38.00||$361.30||Active||+46.03%|
Options sold during the first quarter of 2017.
After the expiry of the options in January for the options that I wrote last year, I once again wrote more covered call options for some of the U.S. stocks that I own (CAT, MCD, WFC). I also wrote a few naked put options for (ENB, MRU) as I want to buy those Canadian stocks at a lower price. I am hoping that all my covered call options get executed as I want to cash in some of my gains. If not, I am still making free money from the option premiums and continue to collect dividends.
At the end of last year, I still have about $45,000 in cash that I still need to put to work. As I mentioned earlier, I will be focusing on dividend paying stocks going forward so I bought all the dividend paying stocks listed in the above table. For some of the accounts, I also shifted my focus to index ETFs. Most of the extra cash were deployed, and now, I just sit back and collect the dividends and watch my money grow.
This quarter, I was mostly cleaning up my accounts by shifting low paying dividend stocks from my TFSA and RRSP accounts to my taxable account. I was selling the same stock in my TFSA and RSRP accounts and buying them back in my taxable account. At the same time, I am also adding more higher paying dividend stocks to my TFSA and RRSP accounts so that those dividends can be tax sheltered. So these boring activities in this category get a boring meet expectation rating.
Net Worth Performance
From a quarter to quarter point of view, I don’t pay much attention to the movement of my net worth. I prefer to assess my net worth performance on an annual basis. I think that it’s a better measure. Based on the table above, performance of my net worth is performing well (+6.04%) comparing to the return of the S&P TSX (+1.70%) and S&P 500 (+5.53%) index. My 2017 net worth goal is to reach $1.3M by the end of the year. At this pace, it seems achievable and hopefully, my performance can continue to improve. Hence, I’ll give this category a meet expectation.
2017 Q1 Overall Performance
Overall, I have been performing relatively well in the savings and real estate categories. I hope that I can continue to maximize my TFSA and RRESP contribution at the beginning of every year. I also hope to complete the transformation of my current investment portfolios into a high dividend yield portfolio consisting mostly of stocks that have a strong dividend payment history. Since my goal is to increase my net worth by 10% annually, I only need to increase my net worth by approximately 2.5% per quarter. Hence, a return of +6.04% is definitely exceeding my set expectation.
So, how often to you conduct your net worth calculation? What financial goals do you set for yourself? How do you balance your current lifestyle with saving for the future?